Draft Report to Congress Energy Policy Act of 2005, by zln29156

VIEWS: 7 PAGES: 57

									      DRAFT REPORT TO CONGRESS:

ENERGY POLICY ACT OF 2005, SECTION 1813,
   INDIAN LAND RIGHTS-OF-WAY STUDY




         U.S. Department of Energy

       U.S. Department of the Interior



                August 7, 2006
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                                                               Contents
1.  Introduction............................................................................................................................. 1
  1.1. Statutory Language of Section 1813............................................................................... 1
  1.2. Scope of Section 1813 .................................................................................................... 2
  1.3. Issues Raised in Scoping the Study ................................................................................ 4
    1.3.1.    Tribal Sovereignty, Consent, and Self-Determination............................................ 4
    1.3.2.    Increasing Costs of Energy ROWs ......................................................................... 5
    1.3.3.    Decreasing Energy ROW Term of Years and Increasing Negotiation Periods ...... 6
    1.3.4.    Uncertainty in Energy ROW Negotiations ............................................................. 6
    1.3.5.    Investments in Infrastructure .................................................................................. 7
    1.3.6.    Potential for Uncertainty Related to Trespass Situations ....................................... 8
    1.3.7.    Cost to Consumers .................................................................................................. 8
    1.3.8.    Standards for Valuing Energy ROWs on Tribal Land............................................ 9
2. Negotiations for Energy ROWs on Tribal Land and the Implications for Tribal Self-
Determination and Sovereignty .................................................................................................... 11
  2.1. Statutory Background ................................................................................................... 11
  2.2. Regulatory Background ................................................................................................ 13
  2.3. Federal Policy of Tribal Self-Determination ................................................................ 13
  2.4. The Issue of Consent and Implications for Tribal Sovereignty .................................... 14
3. National Energy Transportation Policies Related to Grants, Expansions, and Renewals of
Energy ROWs on Tribal Land ...................................................................................................... 15
  3.1. National Energy Transportation Policies Directly Relevant to Energy ROWs on Tribal
  Land 15
    3.1.1.    Indian Right-of-Way Act of 1948 and Implementing Regulations ...................... 15
    3.1.2.    Historical Energy ROW Statutes and Regulations ............................................... 16
  3.2. General Policies Relating to Energy Matters on Tribal Land....................................... 17
    3.2.1.    Emergency Authorities ......................................................................................... 17
    3.2.2.    Executive Branch Policies .................................................................................... 18
4. Issues for Stakeholder Consideration Concerning Standards and Procedures for Negotiation
and Compensation for Energy ROWs on Tribal Land.................................................................. 20
  4.1. Valuation Methods and Negotiations Regarding Energy ROWs on Tribal Land ........ 20
  4.2. Summary of Comments ................................................................................................ 20
  4.3. Scope and Nature of the Issue....................................................................................... 23
  4.4. Options to Address the Issue......................................................................................... 25
    4.4.1.    Options for Consideration by the Parties or the Departments .............................. 25
    4.4.2.    Options for Consideration by Congress................................................................ 27
5. Analyses of Negotiations and Compensation Paid for Energy ROWs on Tribal Land ........ 32
  5.1. Background ................................................................................................................... 32
  5.2. Case Study and Survey Process .................................................................................... 32
  5.3. Limitations on Historical Analysis ............................................................................... 32
    5.3.1.    Number of Energy ROWs on Tribal Land............................................................ 32
    5.3.2.    Difficulty of Comparing Energy ROWs ............................................................... 33
    5.3.3.    Confidentiality of Energy ROW Information ....................................................... 33
  5.4. Formal Case Studies ..................................................................................................... 33
    5.4.1.    Ute Indian Tribe of the Uintah and Ouray Reservation........................................ 34
    5.4.2.    Southern Ute Indian Tribe .................................................................................... 35


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   5.4.3. Morongo Indian Reservation ................................................................................ 38
   5.4.4. Navajo Nation ....................................................................................................... 40
 5.5. Survey Information ....................................................................................................... 44
   5.5.1. Edison Electric Institute........................................................................................ 44
   5.5.2. Interstate Natural Gas Association of America .................................................... 47
 5.6. Other Case Studies........................................................................................................ 49
   5.6.1. Bonneville Power Administration......................................................................... 49
   5.6.2. The Hopi Tribe...................................................................................................... 49
   5.6.3. Pueblo of Santa Ana.............................................................................................. 50
   5.6.4. San Xavier District of the Tohono O’Odham Nation ........................................... 50




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                                             Notation
The following is a list of the acronyms, abbreviations, and units of measure used in this
document.

                              Acronyms and Abbreviations
APS            Arizona Public Service

BIA            Bureau of Indian Affairs
BLM            Bureau of Land Management
BPA            Bonneville Power Association

CEPC           California Electric Power Company
C.F.R.         Code of Federal Regulations
Cong.          Congress, Congressional
CPI            consumer price index

DOE            U.S. Department of Energy
DOI            U.S. Department of the Interior

EEI            Edison Electric Institute
EPAct          Energy Policy Act of 2005
EPNG           El Paso Natural Gas Company

Fed. Reg.      Federal Register
FERC           Federal Energy Regulatory Commission
FPC            Federal Power Commission

GRIC           Gila River Indian Community

HRA            Historical Research Associates

INGAA          Interstate Natural Gas Association of America
IRA            Indian Reorganization Act of 1934

MOU            memorandum of understanding

NOG            Navajo Nation Oil and Gas Company

OIWA           Oklahoma Indian Welfare Act

Pub. L.        Public Law

ROW            right-of-way

SCE            Southern California Edison


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SEC       Securities and Exchange Commission
S. Rept   Senate Report
Stat      U.S. Statutes at Large

U.S.      United States
U.S.C     United States Code
USPAP     Uniform Standards of Professional Appraisal Practices

ZR        zone rent

                                Units of Measure

kV        kilovolt(s)

mcf       thousand cubic feet




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                                   Executive Summary
[The executive summary for the final report will be prepared after receiving comments on the
draft report.]




                                                                                               vi
1. Introduction
The U.S. Department of the Interior (DOI) and U.S. Department of Energy (DOE) (Departments)
provide this report to Congress pursuant to Section 1813 of Public Law (Pub. L.) 109-58, the
Energy Policy Act of 2005 (EPAct).

In this Introduction, the Departments begin by explaining their effort to set study parameters to
best comply with Congress’ mandate in Section 1813. The Departments also present a summary
of comments received in consultation with interested tribes, energy companies, associations,
interest groups, and other governmental representatives.

In Section 2 of the report, the Departments present an assessment of the statutory and regulatory
foundations for seeking an energy right-of-way (ROW) on tribal land and the implications of this
process for tribal sovereignty and self-determination.

In Section 3 of the report, the Departments present an analysis of national energy transportation
policies relevant to energy ROWs on tribal lands. This analysis provides an additional foundation
for understanding the principles of tribal sovereignty and self-determination in the context of
national energy transportation on tribal lands.

Based on these assessments, and taking into consideration issues present in energy ROW
negotiations, the Departments then present a range of options for consideration by tribes, energy
companies, and Congress regarding procedures for energy ROW negotiations and standards for
determining fair and appropriate compensation for energy ROWs on tribal lands.

Finally, the Departments provide a summary of the data and information collected for historic
and current rates of compensation for energy ROWs on tribal land. The data and information
were gathered through case studies and from survey information collected by others.

1.1.   Statutory Language of Section 1813
Section 1813(a)(1) of EPAct requires the Departments to jointly conduct a study of issues
regarding grants, expansions, and renewals of energy ROWs on tribal lands. Section 1813(a)(2)
further requires the Departments consult with Indian tribes, the energy industry, appropriate
governmental entities, and affected businesses and consumers in the course of the study.

Section 1813(b) requires the Departments to submit a report to Congress on the findings of the
study including:

       (1) an analysis of historic rates of compensation paid for energy ROWs on tribal
       land;
       (2) recommendations for appropriate standards and procedures for determining
       fair and appropriate compensation to Indian tribes for grants, expansions, and
       renewals of energy ROWs on tribal land;
       (3) an assessment of the tribal self-determination and sovereignty interests
       implicated by applications for the grant, expansion, or renewal of energy ROWs
       on tribal land; and
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        (4) an analysis of relevant national energy transportation policies relating to
        grants, expansions, and renewals of energy ROWs on tribal land.

These four elements of the study are addressed in this report in Sections 5, 4, 2, and 3,
respectively. The report is organized in this manner because the analysis of tribal sovereignty,
self-determination, and energy policy issues, set the context for discussion of standards and
procedures for determining fair and appropriate compensation for energy ROWs on tribal lands.

1.2.    Scope of Section 1813
The language of Section 1813 presents a very broad field of study. Potentially, Section 1813
encompasses hundreds of tribes and thousands of different types of energy ROWs on tribal lands
over the entire course of the federal relationship with Indian tribes.

To focus on the core issues in the time available to conduct the study, the Departments clarified
and narrowed the terms of the study. In doing this, the Departments relied heavily on the body of
comments from Indian tribes, energy companies, associations, state and local governments, and
interest groups. The Departments’ intent was to address the core issues raised by Congress.

First, Section 1813 requires “an analysis of historic rates of compensation paid for energy rights-
of-way on tribal land.” Given the limited time and resources available to conduct the study, as
well as the confidential nature of energy ROW agreements, the Departments determined that the
most feasible approach for an analysis of historic rates was to rely on case studies of energy
ROWs, supplemented by voluntary surveys of tribal and energy groups. The Departments
received many comments on this approach. Tribes and tribal associations (tribal parties)
commented that a case study approach would seriously limit the Departments’ ability to get a full
understanding of energy ROWs on tribal lands, in particular, historic negotiations with tribes for
energy ROWs. Tribes also noted that this approach would fail to account for numerous ROWs
that lacked documentation or compensation agreements. Energy companies, trade associations,
and interest groups (industry parties) were generally comfortable with a study plan that relied on
case studies.

After careful consideration of these comments, the Departments reaffirmed the decision to rely
on case studies and voluntary survey information as the most feasible option for completing the
study in the time allotted while also managing confidentiality issues. The Departments
acknowledge that the data included in this report do not constitute a comprehensive review of
rates paid for energy ROWs on tribal lands. The Departments also acknowledge that the case
study approach may tend to focus on the more complicated or contentious examples of energy
ROW negotiations. Moreover, as many tribes reported in their comments, the case study
approach can represent only a few of the thousands of energy ROWs on tribal lands, many of
which were successfully granted, renewed, or expanded.

Second, the definition of tribal lands provided by Section 1813 requires clarification. “Tribal
lands” is defined, by reference to EPAct, Section 503, which amends Section 2601 of the Energy
Policy Act of 1992, as “any land or interests in land owned by any Indian tribe, title to which is
held in trust by the United States, or is subject to a restriction against alienation under laws of the
United States.” In conducting this study, the Departments found that it was important to clarify


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to the participants that this definition does not include energy ROWs on tribal fee lands,
individual Indian trust allotments, or individual Indian fee lands.1

Third, clarification of the term “energy rights-of-way” is also needed. This term is not defined in
Section 1813, is very broad, and could encompass many different types of ROWs. In comments
for the Section 1813 report, the Jicarilla Apache Nation listed some of the types of energy ROWs
that could potentially fall within the scope of this term:

         •   Local gas gathering pipelines from wells to transmission line tie-in points with
             the gas field,
         •   Intrastate gas transmission lines from gathering system tie-in points to
             processing plants,
         •   Intrastate and interstate gas transmission pipelines from gas processing plants
             to an industrial end user or gas distribution system,
         •   Local gas distribution system pipelines (the consumer delivery system),
         •   Local oil gathering lines from wells to transmission line tie-in points to a
             refinery,
         •   Intrastate oil transmission lines from gathering system tie-in points to a
             refinery,
         •   Intrastate and interstate refined products pipelines from a refinery to
             distribution terminals,
         •   Intrastate and interstate high-voltage electric power lines from a generating
             station to transformer stations,
         •   Local low-voltage electric power lines to consumers,
         •   Coal slurry pipelines,
         •   Roads for hauling oil from wellhead storage tanks to a refinery, and
         •   Roads for hauling coal from a mine to a coal-burning facility.2

The term “energy right-of-way” could also include a variety of railroad lines carrying energy
products across tribal lands.

While all these different ROWs pertain to energy, they are not necessarily comparable. As
explained in Section 2, different types of energy ROWs may derive from slightly different
statutory authority. In addition, the economics, environmental impacts, federal oversight, and
service requirements for each type of energy ROW are very different. Because the range of
energy ROWs on tribal lands is so extensive, the Departments determined that a more limited
examination was required to successfully complete this report.

The Departments therefore focused the scope of the Section 1813 study to electric transmission
lines, and natural gas and oil pipelines. The study includes ROWs associated with interstate

1
  Federal policy regarding Indian land holding has varied over the history of the federal-tribal relationship. The
majority of Indian lands are now held as tribal trust lands and are the focus of this study. The General Allotment Act
of 1887 created tribal and individual allotted lands, many of which are still present. Many tribes have also purchased
lands in fee, sometimes to recover lands lost through allotment. These lands may be held in fee, or transferred to
trust status through regulations at 25 C.F.R. Part 151.
2
  Comments of the Jicarilla Apache Nation 11-12 (May 12, 2006).


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transit and local distribution. The Departments selected these energy ROWs for study because of
the number of interested parties that discussed these types of ROWs, the availability of
information on them, and the nature of their role in delivering energy resources to consumers.

The Departments finally caution Congress and readers of this report that any conclusions or
proposals made in this report should be understood in light of the Departments’ focusing of the
study scope. Because the Departments’ study focused on electric transmission, natural gas and
oil pipelines our assessments and analysis were based on the law and facts surrounding these
specific energy ROWs. Application of this report beyond ROWs for electric transmission,
natural gas, and oil pipelines should be done with caution.

1.3.      Issues Raised in Scoping the Study
The Departments held two nationwide public meetings in March and April 2006 to solicit
comments from stakeholders on the scope of the study. The dates and times of these meetings
were published in the Federal Register. In addition, the Departments communicated with tribes
through letters sent directly to tribal leaders and through contact with the regional offices of the
Bureau of Indian Affairs (BIA). The Departments posted the transcripts of both meetings and all
comments received on a website for public review (http://1813.anl.gov).

In the course of the two public meetings and through submission of written comments by
interested groups and individuals, hundreds of study participants raised issues related to the
Section 1813 study. The Departments received 144 sets of written comments from 100
commenters, including 53 tribes, 7 tribal associations, 14 energy companies, 4 energy trade
associations, 5 state or local governments, 2 interest groups, and 15 individuals or other
commenters.

The following common themes surfaced in the course of scoping the study:

      • Tribal sovereignty and its inherent connectedness to the statutory and regulatory
        requirements of tribal consent in energy ROW matters,
      • Importance of tribal self-determination policies in advancing oversight of energy ROWs
        and expanding energy production,
      • Rising costs of energy ROW renewals, and
      • Trends toward shorter term lengths (in years) for ROWs and longer negotiation periods.

1.3.1. Tribal Sovereignty, Consent, and Self-Determination
As an overarching issue, nearly all parties from all perspectives recognized the inherent
sovereignty of Indian tribes and supported federal policies of tribal self-determination. Tribal
parties emphasized the federal government’s recognition of their inherent sovereignty through
treaties, legislation, Supreme Court decisions, Executive Orders, and ongoing interactions
between the federal government and tribes. Paraphrasing COHEN’S HANDBOOK OF FEDERAL
INDIAN LAW,3 one tribal party referred to the “long-standing principle of federal Indian law that
Indian tribes possess inherent sovereignty,” which “exists in the tribe itself” and “does not derive


3
    See generally COHEN’s HANDBOOK OF FEDERAL INDIAN LAW 204–220 (Aug. 2005 ed).


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from the federal government.”4 Referring to the tribal consent provisions in existing ROW
statutes and regulations, many tribal parties commented that tribal consent is a manifestation of
tribes’ sovereign authority to determine the terms of access to tribal lands.5 Tribal parties
commented on the interrelatedness of sovereignty, the federal policy of tribal self-determination,
and tribal governmental functions.6 Representatives from the energy industry also voiced their
recognition of tribal sovereignty.7

Several tribal parties noted that tribal governments perform the responsibilities of sovereigns by
providing services such as education, health care, environmental protection, sanitation, and law
enforcement but, for practical purposes, are unable to raise revenues through taxation as other
sovereigns are able to do. In addition, consistent with the goals of the federal self-determination
policy, tribal parties described the development of governing capacity that is necessitated by
managing ROWs, and is supported by energy ROW fees. Several tribal parties stated that energy
ROW management activities require high levels of staff time and tribal resources.8 For example,
the need for tribal governmental capacity to deal with energy ROWs was evident when a natural
gas pipeline exploded on the Confederated Tribes of the Umatilla Reservation in 1999. The
Tribe’s police, fire, and emergency response personnel responded to the blast and assisted in
containing the damage and investigating the cause of the explosion.9

Tribal parties also commented that tribal governmental involvement is necessary to prevent harm
to reservation resources. In particular, tribal parties noted that sovereignty and governmental
capacity were critical to protect tribal natural and cultural resources, and tribal sacred sites.10

1.3.2. Increasing Costs of Energy ROWs
Several energy industry parties indicated that the statutory and regulatory requirement that tribes
consent to energy ROWs on tribal lands resulted in increased energy ROW costs, including costs
from longer negotiation periods.11 Industry parties expressed concern about the increasing cost of
energy ROWs and the implications of those rising costs for energy companies and consumers.
Industry parties noted concern about the increasing costs of energy ROW renewals because of
energy companies’ investment in existing facilities and the potential for regulatory constraints
against abandoning an energy line.12



4
   Comments of Manzanita Band of Mission Indians, St. Regis Mohawk Tribe, Three Affiliated Tribes 6 (April 29,
2006).
5
   See, e.g., Comments of the Isleta, Zia, and Sandia Pueblo, May 15, 2006; Comments of the Ute Indian Tribe of the
Uintah and Ouray Reservation cover letter (May 11, 2006).
6
   See. e.g., Comments of the Council of Energy Resource Tribes and National Congress of American Indians 2 (Jan.
20, 2006).
7
  See, e.g., Statement of New Mexico Oil & Gas Association 2 (April 18, 2006); Comments of the Edison Electric
Institute 2 (May 15, 2006).
8
   See, e.g., Comments of the Ute Indian Tribe of the Uintah and Ouray Reservation 67 (May 11, 2006).
9
   Comments of the Confederated Tribes of the Umatilla Indian Reservation 4 (Jan. 6, 2006).
10
    See, e.g., Comments of the Leech Lake Band of the Ojibwe 1-2 (Jan. 9, 2006); Comments of the Pueblo of Jemez
4 (Jan. 20, 2006); Comments of the Pechanga Band of Luiseño Mission Indians 7 (May 15, 2006).
11
    See generally, Comments of Interstate Natural Gas Association of America (May 15, 2006); Comments of the
Edison Electric Institute (May 15, 2006).
12
    Comments of the Edison Electric Institute 8 (May 15, 2006).


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Member surveys and case studies conducted by the Edison Electric Institute (EEI) and Interstate
Natural Gas Association of America (INGAA) provided information on the increase in prices for
energy ROW renewals.13

1.3.3. Decreasing Energy ROW Term of Years and Increasing Negotiation Periods
Industry parties generally noted that the terms of years for energy ROWs are decreasing but that
the ROW negotiation times are increasing. Industry parties pointed out that shorter energy ROW
terms and longer negotiation periods increase the ROW-related administrative costs to both
industry and tribes. These factors also “add to the uncertainty which utilities must consider in
their investment and planning processes.”14

Tribal parties also commented on the length of negotiations. One tribe observed that negotiations
took from six months to eight years, but that most of the time, the parties worked in good faith to
resolve their differences. Tribal parties noted that each energy ROW over tribal lands has unique
characteristics that can affect negotiation times. For example, the particular energy ROW may:
    • traverse large, compact, contiguous tracts of land;
    • impact lands of cultural or religious significance;
    • affect agricultural lands;
    • provide utility services to reservation residents;
    • involve a large number of individual landowners; or
    • require an environmental assessment.15

One energy company representative noted the efficiency of negotiating with tribes for energy
ROWs, stating that while the company could readily obtain ROWs for exploration and
production operations on tribal lands, “the overall time required to bring gas to market, inclusive
of obtaining Rights of Way for gathering systems, is a fraction of the time required on Federal
surface.”16

1.3.4. Uncertainty in Energy ROW Negotiations
Many industry parties commented that the exercise of tribal sovereignty and consent to energy
ROWs, in the absence of a uniform and measurable standard for valuing ROWs, creates a high
degree of uncertainty for the nation’s energy infrastructure and consumer’s energy costs.17

On the other hand, tribal parties made it clear that changes to tribal sovereignty and their ability
to consent to energy ROWs through imposition of a standard valuation method would result in
great uncertainty about a tribe’s ability to exercise self-determination and to manage its energy
resources.



13
   Comments of the Edison Electric Institute 8 (June 21, 2006); Comments of Interstate Natural Gas Association of
America 8-10 (May 15, 2006).
14
   Comments of the Edison Electric Institute 5 (May 15, 2006).
15
   See, e.g., Comments of the Shoshone-Bannock Tribes 15 (May 12, 2006).
16
   Comments of the Bill Barrett Corporation 1 (Mar. 8, 2006).
17
   See, e.g., Comments of the Edison Electric Institute 2 (May 15, 2006); Comments of Interstate Natural Gas
Association of America 3 (May 15, 2006); Comments of Idaho Power Company 2 (May 15, 2006).


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1.3.5. Investments in Infrastructure
Industry parties commented that financial institutions and rating agencies could view shorter
energy ROW term of years, longer negotiation periods, and escalating energy ROW rates as a
“risk” to the industry. The perception of such a risk by financial institutions could “adversely
affect the cost of the capital needed to build new generation and transmission infrastructure….”18
Moreover, industry parties noted that excessive energy ROW fees and other access costs
associated with tribal lands generally discourage expansion of, and investment in, existing
facilities on those lands thereby reducing job-creation and development opportunities for tribes.19

One industry party commented, however, that risks in the energy industry were widespread and
could come from financial markets and national and international policies, in addition to
fluctuating prices, supply, and demand which contribute to the volatile nature of the industry.20
Another energy company also noted that the Section 1813 study itself, and concern about
changes in the law, created uncertainty.21

To gauge the level of business risk in the energy industry that is related to interactions with
tribes, a consultant for one tribal party reviewed Security and Exchange Commission (SEC)
filings and notations of risk in those filings.22 Among the 18 western companies studied from
2001 to 2005, the consultant found that in most years all of these energy companies faced
challenges associated with energy infrastructure construction and/or operation. However, the
consultant found that over the five-year period, only three companies ever characterized the
negotiation – or renegotiation – of tribal ROWs as a material issue in annual reports to the SEC.

Tribal parties also generally commented that energy production and the number of ROW grants
on their reservations are increasing or consistent with earlier levels. One tribal party presented
data on the number of natural gas pipeline and electric transmission ROWs granted on their lands
since 1980 to illustrate that the granting of energy ROWs continued at earlier rates or grew with
some fluctuation depending on economic cycles.23 Another tribal party commented that over the
last twenty years they have successfully concluded negotiations for grants or renewals of
interstate pipelines with El Paso Natural Gas Company, Northwest Pipeline Company
(Williams), TransColorado, Transwestern, and Mid-America Pipeline Company.24

Tribal parties also noted that innovative energy ROW agreements have led to expansion of
energy investment and resources on their reservations. In one case, these agreements added
about 1.7 trillion cubic feet to the nation’s supply of natural gas.25



18
   Comments of the Edison Electric Institute 12 (May 15, 2006).
19
   See, e.g., Comments of Western Business Roundtable 1 (Jan. 20, 2006); Comments of Idaho Power Company 2
(May 15, 2006); Comments of Edison Electric Institute 13 (May 15, 2006); Comments of Interstate Natural Gas
Association of America 3 (May 15, 2006).
20
   Comments of the New Mexico Oil and Gas Association 1 (Jan. 20, 2006).
21
   Comments of the Bill Barrett Corporation 2 (Mar. 8, 2006).
22
   Comments of the Ute Indian Tribe of the Uintah and Ouray Reservation 47-50 (May 11, 2006).
23
   Id. at 61-62.
24
   Comments of the Southern Ute Indian Tribe 4 (May 15, 2006).
25
   Id. at 8.


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1.3.6. Potential for Uncertainty Related to Trespass Situations
Industry parties expressed concern about the possibility that energy ROW agreements could
expire, leaving energy facilities in trespass. A trade association raised concerns that members
found in trespass could have access to their facilities curtailed or blocked, thereby limiting their
ability to conduct maintenance on lines and other facilities.26 This trade association also noted,
however, that the Administrative Procedure Act and three federal court rulings protect a timely
ROW renewal applicant from actual trespass.27

Tribal parties stated that the industry parties pointed to no specific instances in which the
statutory and regulatory requirements for tribal consent or delays in energy ROW renewals
resulted in disruptions in energy delivery or threatened the reliability of the system.28 Tribal
parties noted that they have never evicted an energy company with an expired ROW or required
a company to remove its energy infrastructure from tribal lands. Instead, tribal parties
commented that tribes should be fully compensated for trespass situations. Tribal parties also
commented that they have not and will not disrupt the transportation of energy supplies, and
viewed trespass situations as an opportunity to create opportunities for improved long-term
business relationships.29

1.3.7. Cost to Consumers
Industry parties expressed concern that escalating energy ROW fees and negotiation costs will
raise customers’ energy costs. An energy company, noting that 70 percent of its natural gas
comes from two major supply companies with infrastructure on tribal lands, indicated that its
natural gas ratepayers could be negatively impacted by unreasonable energy ROW fees paid by
interstate pipeline companies.30 A trade association also contended that energy ROW renewals
resulted in tens of millions of dollars in additional costs to its member utilities and their
customers.31

Tribal parties asserted that rising energy costs were not the result of increases in energy ROW
fees across tribal lands. Studies were commissioned by three tribes to measure the consumer
cost of energy ROW fees across tribal lands.

Using the Altos North American Regional Gas model, an energy analyst found that energy ROW
costs on tribal lands had no impact on downstream markets. The analyst stated that energy ROW
charges on pipelines traversing tribal lands in the southwestern United States would induce a
volumetric tariff difference of $0.02/mcf (thousand cubic feet) for all pipelines emanating from
or traversing the greater San Juan/Four Corners area and have zero discernible effect on market

26
   Comments of the Edison Electric Institute 5 (May 15, 2006).
27
   Id., citing 5 U.S.C. §§ 551(8) and 558(c), as interpreted by Swinomish Tribal Community v. Federal Energy
Regulatory Comm’n, 627 F.2d 499, 506 (D.C. Cir. 1980); Miami MDS Co. v. Federal Communications Comm’n,
14 F.3d 658, 659-60 (D.C. Cir. 1994); and Natural Resources Defense Council, Inc. v. United States Envtl.
Protection Agency, 859 F.2d 156, 213 (D.C. Cir. 1988).
28
   See, e.g., Comments of the Isleta, Zia, and Sandia Pueblos 8 (May 15, 2006); Comments of the Jicarilla Apache
Nation 13 (May 15, 2006).
29
   See, e.g., Comments of the Ute Indian Tribe of the Uintah and Ouray Reservation 74 (May 11, 2006).
30
   Comments of Sempra Energy 2 (May 15, 2006).
31
   Comments of the Edison Electric Institute 12 (May 15, 2006).


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prices.32 The analyst concluded that the tribal energy ROW costs do not impact downstream
markets at all.33

A second tribally commissioned study, using published reports of the Navajo Nation’s proposed
ROW fee for the El Paso Natural Gas (EPNG) network, determined that the potential impact on
downstream consumers in Arizona, California, and Nevada would be between $0.40 and $0.60
per year for the average residential user if the ROW fee is spread over EPNG’s total pipeline
system. The cost would be between $0.58 and $0.85 per year if the Tribe’s ROW cost is passed
directly to the consumers in these downstream states.34

And, a third tribally contracted study sought to determine what percentage of a consumer’s bill is
attributable to energy ROW costs for electric transmission lines and natural gas pipelines on
tribal lands. The study first determined the percentage of energy costs that are attributable ROW
fees generally, and then estimated the portion of these costs attributable to ROWs on tribal lands.
The study concluded that for the average homeowner tribal ROW costs amounted to between
$0.01 and $0.06 per month for electricity and between $0.001 and $0.016 per month for natural
gas.35

An economic analysis of energy ROW compensation presented by an interest group, however,
stated that if residential customers fully bear the cost increases associated with energy ROW
renewal fees for all 95 tribal ROWs under the jurisdiction of a gas and electric utility of New
Mexico, those customers could see their electric rates increase as much as 5 percent.36

Industry parties also commented that consumer energy prices could increase because of
increased negotiation costs, in particular, potential trespass damages levied against utilities. A
trade association commented that trespass penalties could add hundreds of thousands, or even
millions, of dollars in additional costs to the utility and its customers but provided no specific
data or actual instances of such a problem.37

1.3.8. Standards for Valuing Energy ROWs on Tribal Land
Industry parties stated that concerns about the impacts of energy ROWs on infrastructure
reliability and consumer energy costs could be alleviated through imposition of an “objective,
consistent, transparent, and uniform standard for valuing” energy ROWs on tribal land.38 One
trade association suggested that compensation on tribal lands should be based on objective
assessments of comparable, nearby land value, the nature of use, and location of the energy
ROW.39 An interest group suggested that fair market value would be an appropriate standard for

32
   Dale M. Nesbitt, Altos Management Partners, Inc., Impacts on Natural Gas Markets of Charges Assessed for
Tribal Rights-of-Way in the Southwestern United States 4 (May 15, 2006) [submitted with comments of the
Southern Ute Indian Tribe (May 15, 2006)].
33
   Id.
34
   Charles J. Cicchetti, Pacific Economics Group, The Economic Implications of Navajo Right of Way Fees 8 (May
15, 2006) [submitted with comments of the Navajo Nation (May 13, 2006)].
35
   Comments of the Ute Indian Tribe of the Uintah and Ouray Reservation 36-46 (May 11, 2006).
36
   Comments of the FAIR Access to Energy Coalition 9 (June 16, 2006).
37
   Comments of the Edison Electric Institute 5 (May 15, 2006).
38
   See, e.g., Comments of Interstate Natural Gas Association of America 2 (May 15, 2006).
39
   Comments of the Edison Electric Institute 14 (May 15, 2006).


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valuing energy ROWs on tribal land citing it as the nationally recognized standard for
determining compensation for interests in land required for the public good.40

These suggested standards are similar to those used in eminent domain proceedings. Indeed, one
utility company stated that without an eminent domain alternative there are few, if any, limits to
the amount of compensation discussed in negotiations between tribes and utilities.41

Tribal parties observed that imposing a standard valuation method and mandating its acceptance
would constitute an exercise of eminent domain that cannot apply to lands reserved for tribal use.
Tribal parties asserted that condemning tribal lands for private energy purposes violates the
“exclusive use” provision of many treaties, the federal government’s trust responsibility to the
tribes and the promise that tribal lands and tribal reservations will remain under the control and
beneficial ownership of the tribes.42 Tribal parties also commented that traditional land appraisal
techniques do not recognize that tribal lands can not be bought and sold in an open market.

Citing the uniqueness of tribal lands and particular tribal circumstances, tribes voiced their
support for maintaining the present negotiating process. Tribal parties stated that negotiation
between a tribe and an energy company is an appropriate basis for determining energy ROW
valuation because, like other governments, tribes have sovereign responsibilities and must
appropriately manage its resources for the benefit of its people.43 Finally, tribal parties stated
that proposals for uniform valuation techniques were regressive and similar to discredited federal
Indian policies.44




40
   Comments of FAIR Access to Energy Coalition 2 (May 15, 2006).
41
   Idaho Power Company 3 (Feb. 15, 2006).
42
   See, e.g., Comments of the Quechan Indian Tribe 1-2 (May 15, 2006); Comments of The Confederated Tribes of
the Warm Springs Reservation of Oregon 7 (May 15, 2006).
43
   See, e.g., Comments of the Pechanga Band of Luiseño Mission Indians 5 (May 15, 2006).
44
   See, e.g., Comments of the Isleta, Zia, and Sandia Pueblos 16 (May 15, 2006).


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2. Negotiations for Energy ROWs on Tribal Land and the
   Implications for Tribal Self-Determination and Sovereignty
2.1.    Statutory Background
The history of statutes governing energy and other types of ROWs over tribal land can be
divided into three major periods. During the first phase, lasting roughly from the 1880s to 1899,
Congress authorized ROWs by enacting a specific statute for each particular ROW. In the second
phase, beginning in 1899, Congress began to pass acts concerning categories of ROWs, such as
those for the purpose of building railroad lines. The current phase began in 1948 with
promulgation of the principal statute governing ROWs across tribal lands, commonly called the
General Right-of-Way Act or the Indian Right-of-Way Act (1948 Act).45

During the first phase, the last two decades of the 19th century, Congress passed more than 100
separate laws granting specific ROWs on Indian reservations. These early statutes primarily
involved easements for railroads and telegraph and telephone lines. Generally they required the
company obtaining the ROW to pay damages or compensation as determined by the Secretary of
the Interior. The acts also sometimes required that Indian consent be obtained for the ROW or
the amount of ROW compensation.46

In 1899, in the second phase, Congress ended the practice of passing a separate statute for each
ROW over Indian land and instead gave the Secretary of the Interior general authority to grant
ROWs for railroads and telegraph and telephone lines.47 Companies needing ROWs across
Indian land no longer had to seek Congressional authorization but rather applied directly to the
Secretary of the Interior, who could approve the ROW if the company complied with the terms
of the authorizing statute. Those terms did not include the consent of the tribe that owned the
land.48

On March 11, 1904, Congress gave the Secretary of the Interior authority to grant ROWs for oil
and gas pipelines traversing Indian reservations and allotments:

        The Secretary of the Interior is authorized and empowered to grant a right-of-way
        in the nature of an easement for the construction . . . of pipe lines for the
        conveyance of oil and gas through any Indian reservation . . . or through any lands
        which have been allotted.49

This statute is silent with regard to tribal consent. However, the statute gave the Secretary the
discretion to establish “such terms and conditions as he may deem proper” on renewals of
ROWs.50 Thus, this statute authorized tribal consent as one such term or condition, at least with
regard to renewals.

45
   Act of February 5, 1948, Vol. 62, p. 17, 62 Stat. 17, codified at 25 U.S.C. §§ 323–328.
46
   Historical Research Associates, Inc., Historic Rates of Compensation for Rights-of-Way Crossing Indian Lands,
1948-2006, 4 n. 3, 4, and 5 (July 7, 2006).
47
   Act of March 2, 1899 (30 Stat. 990).
48
   Id.
49
   25 U.S.C. § 321.
50
   Id.


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On March 4, 1911, Congress gave “head of the department having jurisdiction over the lands”
authority to grant ROWs for electric transmission lines across Indian reservations.51 This statute
also is silent with regard to tribal consent, requiring only the approval of the “chief officer of the
department under whose supervision or control such reservation falls.”52

The current phase began with the 1948 Act, enacted on February 5, 1948, which expressly
requires the consent of certain tribes. It provides, in pertinent part:

         The Secretary of the Interior be, and he is empowered to grant rights-of-way for
         all purposes, subject to such conditions as he may prescribe, over and across any
         lands now or hereafter held in trust by the United States for individual Indians or
         Indian tribes. . .53

         No grant of a right-of-way over and across any lands belonging to a tribe
         organized under [the Indian Reorganization Act and the Oklahoma Indian Welfare
         Act]54 shall be made without the consent of the proper tribal officials. . .55

         Sections 323 to 328 of this title shall not in any manner amend or repeal
         provisions of the Federal Water Power Act. . . nor shall any existing statutory
         authority empowering the Secretary of the Interior to grant rights-of-way over
         Indian lands be repealed.56

The consent provision in the 1948 Act is consistent with the tribal organization statutes, which
confer on tribes organized under those statutes the power to prevent the sale, disposition, lease,
or encumbrance of tribal lands, interests in lands, or other tribal assets without their consent.57
Including the consent requirement in the 1948 Act prevents implied supercession of the consent
provisions of the tribal organization acts.58 The 1948 Act also includes authority to impose
conditions at the discretion of the Secretary.

Statutes on the same subject are to be construed together. The 1948 Act constitutes a
comprehensive scheme for granting ROWs across Indian lands. It simplifies and unifies the
earlier procedures and removes some of the confusion that resulted from the practice of enacting
specific legislation for each separate type of ROW or easement.59 The 1948 Act supplants the
earlier ROW statutes but explicitly does not repeal them. When read together, the statutes
51
   Act of March 4, 1911, codified at 43 U.S.C. 961.
52
   Id.
53
   25 U.S.C. § 323.
54
   For purposes of this discussion, the Indian Reorganization Act (25 U.S.C. § 476) and the Oklahoma Indian
Welfare Act (25 U.S.C. § 503) are referred to as the “tribal organization statutes.”
55
   25 U.S.C. § 324.
56
   25 U.S.C. § 326.
57
   Historical Research Associates, Inc., Historic Rates of Compensation for Rights-of-Way Crossing Indian Lands,
1948-2006, 4 n. 3, 4, and 5 (July 7, 2006).
58
   Senate Report (S. Rept.) 823, 80th Congress (Cong.), January 14, 1948, reprinted in 1948, U.S. Code
Congressional (Cong.) Service 1033, pp. 1034–1036.
59
   Id. at 1036 (preserving existing statutory authority for specific types of ROWs “avoid[s] any possible confusion
which may arise, particularly in the period of transition from the old system to the new”).


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empower the Secretary to require tribal consent for a tribe organized under the tribal organization
statutes, and they vest the Secretary with the discretion to mandate tribal consent and other
conditions for ROWs across lands of other tribes.

2.2.    Regulatory Background
Before the 1948 Act was passed, DOI regulations did not require the consent of tribes to enable
the Secretary to make ROW grants over their reservations.60

On August 25, 1951, DOI promulgated regulations governing ROWs that established a unified
procedure for applications, whether for pipelines or other purposes. The regulations were
designed to implement and harmonize the 1948 Act with the myriad of other ROW statutes,
including the 1904 Act, and to codify past DOI policy.61

The tribal consent provision in the regulations is unambiguous: “No right-of-way shall be
granted over and across any restricted lands belonging to a tribe . . . without the prior written
consent of the tribal council.”62 No distinction exists in this regulation between tribes organized
under the tribal organization statutes and other tribes. The regulation requires the consent of all
tribes.

2.3.    Federal Policy of Tribal Self-Determination
Self-determination is a federal policy that guides the U.S. government in its actions, decisions,
and programs regarding Indian tribes. Although it was recognized in principle at the very
beginning of the federal government’s relationship with tribes during the negotiation of treaties,
it evolved into a much stronger policy during the latter part of the 20th century. Tribal autonomy
formed a basic tenet of various pieces of legislation, especially the Indian Reorganization Act of
1934 (IRA)63 and the Indian Self-Determination and Education Assistance Act of 1975.64 In the
latter statute, Congress recognized that the tribes “will never surrender their desire to control
their relationships both among themselves and with non-Indian governments, organizations, or
persons.”65 Most recently, Title V of EPAct directed the Departments to create Indian energy
programs in accordance with “federal policies promoting Indian self-determination.”66

Requiring the consent of a tribe before granting a ROW over its lands is in accordance with the
federal policy promoting Indian self-determination. The tribal consent requirement has been
virtually unchanged since 1951. It reflects a longstanding interpretation of the pertinent statutes
by the agency charged with their administration.




60
   25 C.F.R. § 256.83 (1939).
61
   16 Fed. Reg. 8578 (1951).
62
   25 C.F.R. § 169.3(a). Originally this regulation was published at 25 C.F.R. Part 256. In 1957, DOI reorganized
ROW regulations and placed them under Part 161 of Chapter 25.
63
   25 U. S. C. § 461.
64
   25 U. S. C. § 450a.
65
   Id. at § 450(a)(2).
66
   25 U. S. C. § 3502.


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2.4.    The Issue of Consent and Implications for Tribal Sovereignty
Many tribal parties focused on the authority of Indian tribes to consent to energy ROWs as the
primary issue raised by the Section 1813 study. They strongly objected to the study as an affront
to the principles of tribal sovereignty underlying the relationship between the federal government
and Indian tribes. A number of tribal parties commented that thousands of energy ROWs over
tribal land have been successfully negotiated and approved without disruption to energy delivery,
thereby demonstrating that no changes are needed to the existing procedures.

The principle of tribal sovereignty is central to understanding the statutory and regulatory
requirement of consent. A tribe’s authority to confer or deny consent to an energy ROW across
tribal land derives from its inherent sovereignty — the right to govern its people, resources, and
lands. Sovereignty is generally defined as the authority of a government to define its relationship
with other governments, commercial entities, and others.67 The present right of tribes to govern
their members and territories flows from a historical and preexisting independence and right to
self-government that has survived, albeit in diminished form, through centuries of contact with
other cultures and civilizations.

This history of tribal sovereignty forms the basis for the exercise of tribal powers today.68
Although the United States has long recognized the sovereignty of Indian tribes as “distinct,
independent, political communities” exercising the authority of self-governance,69 the
relationships between federal and state governments and tribal governments are complicated and
delineated in the Constitution, treaties, legislation, Supreme Court decisions, and Executive
Orders.

A tribe’s determination of whether to consent to an energy ROW across its land is an exercise of
its sovereignty and an expression of self-determination. The implication of any reduction in the
tribe’s authority to make that determination is that it would reduce the tribe’s authority and
control over its land and resources, with a corresponding reduction in its sovereignty and abilities
for self-determination.




67
   BLACK’S LAW DICTIONARY 1402 (7th ed. 1999).
68
   FELIX S. COHEN’S HANDBOOK OF FEDERAL INDIAN LAW 231 (1982 ed.).
69
   See Worcester v. Georgia, 31 U.S. 515, 559 (6 Pet.), 1832.


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3. National Energy Transportation Policies Related to Grants,
   Expansions, and Renewals of Energy ROWs on Tribal Land
The Departments’ analysis of relevant national energy transportation policies relating to energy
ROWs on tribal lands focuses on policy expressions regarding tribal consent for the use of tribal
lands and the application of eminent domain principles to tribal lands. Although there are few
national energy transportation policies that directly relate to energy ROWs on tribal lands, the
few policies available directly address the issue of tribal consent. Overall, the policies put in
place by Congress and the executive branch strongly support tribal decision-making regarding
energy ROWs on tribal lands.

Because there are few national energy transportation policies that directly relate to energy ROWs
on tribal lands, this section also considers policies that indirectly relate to energy ROWs on tribal
lands or are generally applicable to energy matters affecting or involving tribes. These policies
provide additional information about the role of tribal consent and of eminent domain principles.
Although expressed in much more general terms, these policies support tribal decision making
and tribal involvement in energy matters.

Statutes that express national energy policy concerning emergency situations are also included in
this discussion as generally applicable energy policies. While the Departments have seen no
evidence that tribal consent would be an issue in an emergency situation, an analysis of these
emergency authorities addresses system integrity and security issues raised by some commenters

3.1.    National Energy Transportation Policies Directly Relevant to Energy
       ROWs on Tribal Land
3.1.1. Indian Right-of-Way Act of 1948 and Implementing Regulations
As explained in Section 2.1 above, energy ROWs on tribal lands are governed by the 1948 Act.70
Pursuant to the 1948 Act, the consent of some Indian tribes must be obtained for an energy
ROWs. Section 2.2 described DOI’s regulations for the 1948 Act. These regulations furthered
Congress’s desire to establish a uniform procedure and harmonize the 1948 Act with the prior
ROW statutes. The regulations establish general procedures for ROW applications,71 ROW
renewals,72 termination of a ROW,73 and specific regulations to recognize and incorporate
historical ROW statutes.74 As pointed out earlier, the regulations require the consent of all Indian
tribes, stating, “No right-of-way shall be granted over and across any tribal land . . . without the
prior written consent of the tribe.”75

Indeed, most tribes conduct substantial oversight authority for energy ROWs on their lands. As
described to the Departments during public scoping, tribes negotiate ROW issues such as route,


70
   Indian Right-of-Way Act of 1948, 62 Stat. 17, codified at 25 U.S.C. §§ 323–328.
71
   25 C.F.R. § 169.5.
72
   25 C.F.R. § 169.19.
73
   25 C.F.R. § 169.20.
74
   See 25 C.F.R. § 169.25 (regarding oil and gas pipelines) and § 169.27 (regarding power projects that include
electric transmission lines).
75
   25 C.F.R. § 169.3.


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compensation, term, and environmental, cultural, and emergency protections pursuant to the
1948 Act.76

Through the 1948 Act and conditions required in DOI regulations, the policy of Congress and
DOI is to require tribal consent for all energy ROWs on tribal lands. Although Congress required
the consent only of tribes organized under the IRA and the Oklahoma Indian Welfare Act
(OIWA), DOI determined that tribal consent was necessary for all tribes. DOI’s determination
was later approvingly cited by Congress when it explained that the legislative history of the 1948
Act “shows no congressional intent that consent ought not to be sought from ‘unorganized’
tribes.’”77 Moreover, as discussed below, DOI’s inclusion of a uniform tribal consent
requirement reflected the frequent practice of obtaining tribal consent pursuant to historical
statutes and regulations.

3.1.2. Historical Energy ROW Statutes and Regulations
National energy transportation policy relating to tribal lands was implemented in a variety of
approaches between the 1880s and 1940s. Of course, it should be noted that federal Indian policy
during this time was shifting from the allotment era which was intended to remove tribal control
of Indian lands to reorganization of tribal governments, and restoration of tribal land status.78 As
pointed out earlier, from 1880 to 1899, Congress authorized ROWs by enacting a specific statute
for each particular one. Although policy expressions in these acts were not consistent, some
required that tribal consent be obtained for the ROW or the amount of ROW compensation.79

Statutes passed in 1904 and 1911 were intended to authorize particular types of energy ROWs on
tribal lands and differed from the earlier acts in terms of policy direction regarding the
requirement of tribal consent. First, neither of these statutes explicitly required tribal consent for
an energy ROW. Second, the 1904 Act directed the Secretary of the Interior to require the
establishment of “such terms and conditions as he may deem proper,” but only for the renewal of
gas or oil pipeline ROWs.80 Third, the 1911 Act more broadly required that electric transmission
ROWs be authorized “under general regulations to be fixed [by DOI].”81 The 1911 Act also

76
   See comments summarized in the Introduction.
77
   House of Representatives, Committee on Governmental Operations, Disposal of Rights in Indian Tribal Lands
without Tribal Consent, 1969 (as it quotes underlying memorandum from Natural Resources and Power
Subcommittee staff).
78
   The primary allotment act, the General Allotment Act of 1887, also know as the Dawes Act, 24 Stat. 388,
authorized the President to allot portions of tribal lands to individual Indians. Individual allotments were to remain
in trust for a period of years, allowing the individual time to assimilate, and then would be conveyed in fee to the
individual. Tribal lands not assigned to individuals were to be sold as surplus lands. The primary effect of the
General Allotment Act was a reduction of Indian held land, for a variety of reasons, from 138 million acres in 1887
to 48 million in 1934. Federal policy reversed course with the passage of the Indian Reorganization Act of 1934, 25
U.S.C. §§ 461 et seq., which ended allotment and restored the status of tribal lands. See William C. Canby, Jr.,
American Indian Law in a Nutshell 19-25 (2nd ed. 1988).
79
   See e.g., the Act of August 5, 1882 (22 Stat. 299) granting a ROW to Arizona Southern Railroad Co. through the
Papago Indian Reservation in Arizona; Section 3 of the Act of March 2, 1889 (25 Stat. 852) granting a ROW to
Forest City and Watertown Railroad Co. through the Sioux Indian Reservation; Section 2 of the Act of June 6, 1894
(28 Stat. 87) granting a ROW to Albany and Astoria Railroad Co. through the Grand Ronde Indian Reservation in
Oregon.
80
   25 U.S.C. § 321.
81
   43 U.S.C. § 961.


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stated that electric transmission ROWs would be allowed on an “Indian . . . reservation only
upon the approval of the chief officer of the department under whose supervision or control such
reservation falls.”82

Nevertheless, on April 12, 1940, writing about an 1890 act, a DOI Opinion of the Solicitor stated
generally, “When the United States reserves rights-of-way over Indian lands or authorizes rights-
of-way to be acquired by private companies, the customary practice has been to provide for
obtaining the consent of the Indians or for the payment of compensation.”83 The 1941 version of
Felix Cohen’s Handbook of Federal Indian Law described the state of the law as follows:

        Congress . . . has conferred upon administrative authorities various statutory
        powers to alienate interests in tribal land less than fee, particularly easements and
        rights-of-way. Generally these statutes do not make tribal consent a condition to
        the validity of the alienation, but as a practical administrative matter tribal consent
        is frequently made a condition of the grant.84

3.2.    General Policies Relating to Energy Matters on Tribal Land
A few general policies further inform the Departments’ study of national energy transportation
policies on tribal lands. These include energy emergency policies, the National Energy Policy,
and goals or protocols for working with tribes. The Departments’ analysis of these expressions of
policy finds a continuing pattern of working cooperatively with tribal governments and with
tribal consent.

3.2.1. Emergency Authorities
While the Departments found no evidence that the requirement of tribal consent for obtaining an
energy ROW contributed to an emergency situation, an analysis of emergency authorities
addresses the system integrity and security issues raised by some industry parties in the Section
1813 study. The Departments examined emergency authorities of the Secretary of Energy
pursuant to the Natural Gas Policy Act and the Federal Power Act. Although these authorities are
used only in times of national emergencies, they can be used to mandate transfers of needed
energy supplies. In an emergency situation, these generally applicable statutes could apply to
tribes.

Although these authorities are rarely used, their existence is important to the overall discussion
of the requirement of tribal consent for energy ROWs. A number of tribal parties commented
that while no tribe has exercised its consent authority in a manner that created an emergency
situation, the issues raised by Section 1813 force tribes into the untenable position of having to
prove a negative, i.e., that no tribe will ever use its consent authority in this manner, or that no
tribe will interfere with supplying energy resources in an emergency. Rather than forcing this
exercise on the tribal parties, the Departments’ analysis finds that emergency authorities could
provide a means of rectifying such a situation if it did occur.
82
   43 U.S.C. § 961.
83
   Opinions of the Solicitor, Application to Flathead Tribal Lands of the Act of August 30, 1890 (26 Stat. 391),
April 12, 1940.
84
   FELIX COHEN, HANDBOOK OF FEDERAL INDIAN LAW 104 (1941) (footnotes omitted) (citing to 25 U.S.C. §§ 311–
322 and historical regulations at 25 C.F.R. §§ 256.24, 256.53, and 256.83).


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3.2.2. Executive Branch Policies
In May 2001, the Administration’s National Energy Policy Development Group issued a report
in May 2001 entitled National Energy Policy. In general terms, the policy touches on at least
two issues related to energy transportation on tribal lands. First the policy notes the involvement
of tribes in the ROW process. Second, the policy recognizes the need to increase energy
infrastructure – a significant issue for many tribes.

Chapter 7 of The National Energy Policy addresses national energy transportation issues and
briefly notes that “tribal governments are authorized to grant rights-of-way across . . . tribal
lands.” for energy resources electric transmission lines and natural gas and oil pipelines.85 For
electric transmission ROWs, the policy does not mention problems with obtaining electric
transmission ROWs on tribal lands. Instead, the primary electric transmission issues the report
cites are transmission bottlenecks and constraints, limited investment in transmission facilities,
individual state siting authority, and limited enforcement of reliability standards.86

The primary natural gas and oil pipeline issues raised in the National Energy Policy include
problems associated with pipeline capacity; obtaining ROWs from federal, state, and local
governments; and community resistance to pipeline construction. The report states, “[C]urrently
it takes an average of four years to obtain approvals to construct a new natural gas pipeline.”87 It
is not clear whether approvals from tribal governments were included in this calculation. In
addition, while it is possible that tribal communities could resist pipeline construction, as other
communities do, the report does not indicate that tribal communities cause problems for natural
gas transmission.

In an Overview section, the National Energy Policy discusses general goals and proposes
modernizing and expanding the nation’s energy infrastructure to raise the living standards of the
American people.88 Modernization and expansion would particularly benefit tribal communities
that currently lack modern electrical and natural gas service. ,The Energy Information
Administration, an independent statistical agency within DOE, found that 14.2% of Indian
households do not have electricity, compared to 1.4% for all U.S. households.89 And, a United
States Census study reported that 16% of Indian households use utility gas to heat their homes,
compared to 51% of all United States households.90 Increasing service to these tribal
communities was noted by some tribal commentators as a national energy transportation policy
relevant to tribal lands.

Other general policy expressions relevant to energy matters on tribal lands are contained in
Presidential Proclamations. On November 12, 2001, President Bush issued a proclamation
stating that “we will protect and honor tribal sovereignty and help stimulate economic
85
   National Energy Policy Development Group, National Energy Policy, 7-9 (May 2001).
86
   Id. at 7-5 to 7-7.
87
   Id. at 7-12.
88
   Id. at xi.
89
   U.S. Dep’t of Energy, Energy Consumption and Renewable Energy Development Potential on Indian Lands ix
(April 2000), available at http://www.eia.doe.gov/cneaf/solar.renewables/ilands/ilands.pdf (using information from
the 1990 Decennial Census).
90
   U.S. Dep’t of Commerce, Bureau of the Census Statistical Brief Housing of American Indians on Reservations -
Equipment and Fuels 3, Table (April 1995), available at http://www.census.gov/apsd/www/statbrief/sb95_11.pdf.


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development in reservation communities.”91 More recently, in another proclamation, the
Administration recognized the defining principles of tribal sovereignty and the right to self-
determination by noting the enactment of EPAct and efforts to enhance energy opportunities and
strengthen tribal economies.92

Prior administrations have also generally expressed a policy of working with tribes on matters
related to tribal interests, including energy matters. In an Executive Order entitled “Consultation
and Coordination with Indian Tribal Governments” executive agencies are instructed to consult
with Indian tribes. It states:

        [w]hen undertaking to formulate and implement policies that have tribal
        implications, agencies shall:

        (1) encourage Indian tribes to develop their own policies to achieve program
            objectives;
        (2) where possible, defer to Indian tribes to establish standards; and
        (3) in determining whether to establish Federal standards, consult with tribal
            officials as to the need for Federal standards and any alternatives that would
            limit the scope of Federal standards or otherwise preserve the prerogatives
            and authority of Indian tribes.93

The Departments each have internal policies implementing this Executive Order.




91
   Presidential Proclamation 7500, 66 Fed. Reg. 57641 (Nov. 12, 2001).
92
   Presidential Proclamation 7956, 70 Fed. Reg. 67635 (Nov. 7, 2005).
93
   Executive Order No. 13175, 65 Fed. Reg. 67429 (Nov. 9, 2000).


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4. Issues for Stakeholder Consideration Concerning Standards and
   Procedures for Negotiation and Compensation
   for Energy ROWs on Tribal Land
4.1.     Valuation Methods and Negotiations Regarding Energy ROWs on
       Tribal Land
Section 1813 directs the Departments to develop recommendations for appropriate standards and
procedures for determining fair and appropriate compensation for energy ROWs on tribal lands.
In this draft report, the Departments provide options, as opposed to recommendations, for
consideration by interested participants.

In the existing statutory and regulatory process the value of a grant, expansion, or renewal of an
energy ROW on tribal lands is determined through negotiations between an Indian tribe and an
energy company. Valuation methods used in these negotiations include:
    • methods used by municipalities
    • methods used for public lands
    • comparison to sales of similar lands
    • valuation of land “over the fence” from the proposed ROW
    • sharing of net benefits or other partnership arrangements
    • cost of alternative routes
    • opportunity cost
    • percentage of energy throughput
    • value of the land before and after the ROW
    • cost of government services
    • adherence to the Uniform Appraisal Standards for Federal Land Acquisitions (Federal
        Land Acquisition Standards), and the Uniform Standards of Professional Appraisal
        Practice (USPAP)

Indian tribes and energy companies may use any combination of these valuation methods, and
others, in their negotiations for appropriate compensation for energy ROWs on tribal lands. This
open negotiation process enables tribes to determine the terms for access to tribal lands and
resources. This process is consistent with long-standing expressions of tribal sovereignty and
self-determination in the federal-tribal relationship.

4.2.     Summary of Comments
The Departments received a number of comments recommending and discussing different
valuation methodologies used in negotiations for energy ROWs on tribal lands and elsewhere.
Overall, most industry parties contended that valuation of tribal lands for energy ROWs should
be based on market value principles.94 Tribal parties rejected those principles as inappropriate
for tribal lands. In addition, some energy companies commented that limiting energy ROW
negotiations to market value would restrict creative arrangements that promote development of
energy resources on tribal lands.

94
  See, e.g., Comments of FAIR Access to Energy Coalition 2 (May 15, 2006); Comments of Edison Electric
Institute 14 (May 15, 2006); Comments of Interstate Natural Gas Association of America 12 (May 15, 2006).


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In more general situations – not involving tribal lands – market value principles derive from the
constitutional concept of “just compensation” which is what the federal government pays when
acquiring private or state-owned property for public purposes by voluntary purchase, exchange,
or eminent domain. The federal government also uses market value principles to determine
compensation for the use of federal lands. The market value that satisfies “just compensation” is
defined by a number of court cases and summarized in the Federal Land Acquisition Standards
as

        the amount in cash, or on terms reasonably equivalent to cash, for which in all
        probability the property would have sold on the effective date of the appraisal,
        after a reasonable exposure time on the open competitive market, from a willing
        and reasonably knowledgeable seller to a willing and reasonably knowledgeable
        buyer, with neither acting under any compulsion to buy or sell, giving due
        consideration to all available economic uses of the property at the time of the
        appraisal.95

These market value principles are supported by the USPAP for use in real estate transactions
generally.96

Most industry parties commented that some form of market value principles should be used to
determine, or at least form the basis for, appropriate compensation for energy ROWs on tribal
lands. One interest group described market value principles in depth, noting that market value
does not reflect the proposed use of the ROW or the value of the ROW to the acquiring
government.97 Industry parties frequently commented, however, that current valuation of many
energy ROWs on tribal lands far exceeds the market value of those lands and appears to include
the added value of the energy development.98

Industry parties pointed out that market value is the standard within the federal government for
valuing property generally. An interest group cited the prevalence of market value principles in
regulations used by DOI and the Forest Service of the Department of Agriculture for determining
land values for a variety of purposes, including energy ROWs.99 This same group also
referenced recent DOI Secretarial Orders and a departmental memorandum requiring use of
market value principles, with some exceptions, for all DOI appraisals.100

Most industry parties suggested that use of market value principles for energy ROWs on tribal
lands would increase certainty for existing and new energy infrastructure by providing an



95
   Uniform Appraisal Standards for Federal Land Acquisitions 30 (5th ed. 2000).
96
   See generally Uniform Standards of Professional Appraisal Practice, Standard 1: Real Property Appraisal,
Development (July 1, 2006) (available at http://commerce.appraisalfoundation.org/html/2006%20USPAP/toc.htm)
97
   Comments of FAIR Access to Energy Coalition 5 (May 15, 2006).
98
   See, e.g., Comments of Edison Electric Institute 10-11 (May 15, 2006); Comments of Interstate Natural Gas
Association of America 2 (May 15, 2006).
99
   Comments of FAIR Access to Energy Coalition 2-3 (May 15, 2006).
100
    Id. at 7-10.


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objective standard for determining value.101 The desire for an objective standard was particularly
emphasized in the case of energy ROW renewals.

In renewal situations, energy companies have existing physical assets and investments on tribal
lands, and industry parties expressed concern that without an objective standard energy ROW
negotiations would automatically escalate to a company’s cost to build around the tribal lands
containing the company’s assets.102 Build-around costs could include lost revenue stream, new
construction, and new ROW fees. Energy companies could also be faced with selling their
existing facilities on tribal land at a reduced value if energy ROWs are not renewed.103 Industry
parties stated that the threat of incurring build-around costs causes uncertainty for existing
projects and discourages future investment in tribal lands.

Tribal parties rejected market value principles as being inapplicable to tribal lands. They noted
that tribal lands are not bought and sold on open markets.104 Furthermore, they pointed out that
tribal lands are held in trust by the federal government and are protected against alienation
through treaties and other agreements which recognize tribal sovereignty over tribal lands and
federal obligations to tribal property.105 Tribal parties commented that one of the most vital
components of their tribal sovereignty is the authority to determine access to and use of tribal
lands and resources.106 They cited history of the federal-tribal relationship as set out in long-
standing treaties, statutes, Supreme Court opinions, and Executive Orders, for confirmation of
this authority.107

Several tribal parties indicated that valuation of tribal lands could be comparable to valuation
methods used by municipalities because both have jurisdiction and responsibilities for providing
services to members or citizens. As reported in a study prepared for one tribal party, cities such
as Houston and Laredo, Texas; and Atlanta, Georgia value ROWs by linear foot. 108 The study
also noted that franchise fees received from the use of public rights-of-way may represent a
significant percentage of a city’s general budget.109 The valuation methods used by
municipalities were reported to depend upon the purpose of the ROW and whether the ROW
could accommodate other uses.110 Tribal parties further noted that related energy ROW fees


101
    See, e.g., Comments of Idaho Power Company 4 (Feb. 15, 2006); Comments of Edison Electric Institute 14 (May
15, 2006).
102
    See, e.g., Comments of Idaho Power Company 4 (Feb. 15, 2006); Comments of Edison Electric Institute 10 (May
15, 2006).
103
    Comments of Interstate Natural Gas Association of America 9 (May 15, 2006).
104
    See generally Comments of the Jicarilla Apache Nation, 17-21 (May 12, 2006).
105
     See, e.g., Comments of the Isleta, Zia, and Sandia Pueblos 3 (May 15, 2006); Comments of the Jicarilla Apache
Nation, 18-19 (May 12, 2006); Comments of Pueblo of Isleta, the Mandan, Hidatsa and Arikara Nation, the Pueblo
of Sandia, the Shoshone-Bannock Tribes and the Pueblo of Zia 3-7 (Jan. 20, 2006).
106
    See, e.g., Id.; Comments of The Confederated Tribes of the Warm Springs Reservation of Oregon 3 (May 15,
2006).
107
    See, e.g., Comments of Pueblo of Isleta, the Mandan, Hidatsa and Arikara Nation, the Pueblo of Sandia, the
Shoshone-Bannock Tribes and the Pueblo of Zia 3-7 (Jan. 20, 2006).
108
    Municipal Administrative Services, Inc, 5 and 7 (May 12, 2006) (submitted with comments of the Navajo Nation
(May 13, 2006)).
109
    Id.
110
    Id. at 2.


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provide the tribes with governmental revenue and that tribes, for practical reasons, are not able to
tax energy resources transported across their reservation lands.111

Tribal parties also rejected the application of any single standard for determining energy ROW
compensation. They contended that a single standard could not be appropriately used to
determine compensation given the variety of energy ROWs and the variety of mineral, natural,
cultural, and sensitive environmental resources under their jurisdiction.112 Without the flexibility
to address these different factors, tribal parties and some energy companies commented that a
single valuation method based on market value of the land crossed by the energy ROW would
reduce participation by tribes in energy partnerships and decrease energy production and
transportation on tribal lands.

Finally, tribal parties commented that calls for requiring energy ROW valuation according to
market value principles were disingenuous for several reasons. First, they pointed out that
energy companies entered into existing ROW agreements with the knowledge that these were
limited-term agreements and that renewal of the agreements would require renegotiation.113
Second, they asserted that some energy ROWs were originally obtained for little or no
compensation, and that past compensation rates are relevant to the current study.114 Thus, the
tribal parties maintain that industry parties are essentially complaining about a change in the
business environment.115

The aforementioned comments demonstrate that the energy industry parties and the tribal parties
are very much at odds over the standards to be used for valuing energy ROWs on tribal lands.
The Departments note, however, that most energy ROW negotiations are completed successfully.
This is true even if the negotiations are protracted and the method for determining the value of
the energy ROW results in compensation that sometimes greatly exceeds the market value of the
tribal lands involved.

4.3.    Scope and Nature of the Issue
Many of the industry parties interested in Section 1813 contend that the existing legal framework
and practices for negotiating energy ROWs on tribal lands are problematic because the status quo
creates an uncertain business climate and increases consumers’ energy costs. Tribal parties
contend that there is no problem with the existing legal framework and practices because energy
continues to be transported across tribal lands, and there is no evidence of significant increases in
costs to consumers. In this section of the report, the Departments identify the scope and nature of


111
    See, e.g., Comments of the Manzanita Band of Mission Indians, St. Regis Mohawk Tribe, and Three Affiliated
Tribes 6-7 (April 29, 2006).
112
    See, e.g., Comments of the Pechanga Band of Luiseño Mission Indians 7 (May 15, 2006); Comments of the
Shoshone-Bannock Tribes 15 (May 12, 2006); Comments of the Isleta, Zia, and Sandia Pueblos 3 (May 15, 2006);
Comments of the Jicarilla Apache Nation, 13-14 (May 12, 2006).
113
    See, e.g., Comments of the Southern Ute Indian Tribe 5-6 (May 15, 2006); comments of the Affiliated Tribes of
Northwest Indians Economic Development Corporation 8 (May 14, 2006).
114
    See, e.g., Comments of the Isleta, Zia, and Sandia Pueblos 6-7 (May 15, 2006); Comments of the Jicarilla Apache
Nation, 18-19 (May 12, 2006); Comments of the Shoshone-Bannock Tribes 9 (May 12, 2006).
115
    See, e.g., Comments of the Southern Ute Indian Tribe 5-6 (May 15, 2006); Comments of the Isleta, Zia, and
Sandia Pueblos 9 (May 15, 2006).


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the issue of negotiating energy ROWs on tribal land from a public interest perspective and assess
its existing and potential magnitude.

Although the issue is significant for the parties, it does not appear to be consequential for the
nation or consumers in general for at least four reasons. First, total energy transportation costs
are a small component of overall energy costs. The Chairman of the Federal Energy Regulatory
Commission (FERC) recently testified before Congress that transportation costs for natural gas
and crude oil petroleum products are relatively small – the transportation component for natural
gas is approximately 6 percent of its delivered cost and approximately 1 percent of the delivered
cost for petroleum products.116 Similarly, transmission costs for electricity are in the range of 10
percent of total delivered electricity costs.117

Second, the fraction of energy transportation infrastructure that is on tribal lands is also small.
Although some tribes require compensation for energy ROWs on their lands in excess of the
lands’ market value for other purposes, the effects are not large enough to have a significant
effect on overall energy transportation costs and the total cost of delivered energy paid by
consumers.

Third, apart from price impacts, there is no evidence to date that any of the difficulties associated
with ROW negotiations have led to any adverse impacts on the reliability or security of energy
supplies to consumers. The conditions cited above concerning the relatively small economic
impacts of existing or potential disputes over energy ROWs on tribal lands also imply that,
except in unusual geographic circumstances, the effects of any future potential ROW disputes on
the reliability or security of energy supplies to consumers are also likely to be small.

Fourth, the problem may be essentially self-limiting. That is, most tribes need additional
revenue sources and have reasons to seek economic development opportunities, including
productive relationships with energy companies. At the same time, many energy companies
have commented that they now find negotiations with tribes so difficult that with respect to new
pipelines or transmission lines, they will “build around” tribal land if possible.

Having determined the scope of the issue, the Departments now turn in this report to a discussion
of its nature. Although much of the commentary by the parties has focused on the
appropriateness of methods for determining compensation for an energy ROW, their inability to
agree on such methods appears to be a symptom of more fundamental factors impeding their
ability to reach agreement on terms for ROWs on tribal lands.

The basic factor is a negotiating climate often marked by uncertainty and lack of shared
objectives. Uncertainties abound when:
   • energy ROWs with limited terms require renewal, but past valuation methods are
        unclear, undocumented, or were developed with little involvement of the tribe;
   • new valuation methods lack transparency;
   • the parties have widely differing cultural values;

116
    Testimony of Chairman Joseph Kelliher, House Committee on Energy and Commerce, Subcommittee on Energy
and Air Quality, summary and 6 (Nov. 2, 2005).
117
    EIA Annual Energy Outlook 2006, p. 147.


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      •   the parties do not have comparable resources to commit to the negotiations;
      •   either party considers the existing relationship to have been unproductive; or
      •   the parties lack shared goals for the future of an energy ROW.

In this uncertain environment, negotiations can take longer, information about the energy ROW
in question may be limited, the parties may feel constrained by older practices that limit creative
business solutions, or the parties may lack the common ground needed to explore potential
solutions.

The significance of these factors — as compared to the use of some set valuation method — is
made clear by the comments of some energy companies whose representatives stated that they
had no problems with the current process for obtaining an energy ROW on tribal lands. Energy
companies that built productive relationships and partnerships with tribes commented that they
find tribes to be fair negotiators for energy ROW valuation on tribal lands.118

4.4.      Options to Address the Issue
To resolve and help avert concerns that could arise in the process of obtaining an energy ROW
on tribal lands, the Departments have developed a range of options for consideration by the
parties and Congress. A number of these options could be helpful in addressing obstacles that
prevent more successful negotiations. Other options require legislative changes by Congress if it
concludes that the issues associated with the existing legal framework and practices concerning
energy ROW negotiations are sufficiently important to require such actions.

4.4.1. Options for Consideration by the Parties or the Departments
a. Develop comprehensive ROW inventories for tribal lands

Individual tribes, energy companies, the Departments, or other entities could develop inventories
of energy ROWs on tribal lands. Tribal parties and industry parties alike commented that energy
ROW negotiations frequently begin with a high degree of uncertainty about the existing
situation. Moreover, it appears that even if parties have accurate information about the specific
energy ROW under negotiation, the negotiations can be influenced by uncertainty regarding
other energy ROWs on the tribe’s lands.

Some tribes and companies have already taken steps to collect this information, but it appears
from the amount of uncertainty present in negotiations that both parties need to prioritize
gathering such basic information. Access to information of this type would facilitate better
oversight, increase understanding of issues considered in ROW negotiations, and potentially
streamline future negotiations. Such information could also bring undocumented energy ROWs
to light, help to avoid trespass situations, and reduce overall uncertainty for future energy ROW
negotiations.




118
  See, e.g. Comments of Questar Southern Trails Pipeline Company 2 (May 15, 2006); Comments of Bill Barrett
Corporation 1 (March 8, 2006).


                                                                                                          25
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b. Develop model or standard business practices for energy ROW transactions

Indian tribes, energy companies, the Departments, or other entities could develop model or
standard business practices for energy ROW negotiations generally and for recurrent energy
ROW situations. Similar to the need for basic energy ROW information described above,
uncertainty in negotiations also derives from a lack of organized information regarding business
practices for energy ROWs on tribal lands. Developing model or standard business practices
would help to normalize and guide negotiations. Even if parties decide to depart from standards
or models for some reason, the foundation provided by such guides would assist parties in
negotiating their individual terms.

Again, some tribal parties and some industry parties have taken steps to develop information
along these lines. However, it appears from the level of uncertainty still present in energy ROW
negotiations that development of model or standard business practices deserves greater priority.

Model and standard business practices could be developed around specific energy ROW
situations. For example, there are practical differences between negotiations for a new energy
ROW and those for renewal or expansion of an existing energy ROW. Negotiations for new
energy ROWs are made in the planning process of a project, when capital expenditures have not
been made. Whereas negotiations for renewed or expanded energy ROWs can be constrained by
existing infrastructure investments, the service needs of existing energy markets, or the history of
the energy ROW in question. While the statutory and regulatory context for negotiating a new,
renewed, or expanded energy ROW is the same, models and standard business practices could
reflect these practical differences.

Model and standard business practices could be developed to address the limited duration of
most energy ROWs on tribal lands. These could include information on when negotiations will
start, what the basis of the negotiations will be, and how disputes will be resolved. In addition,
DOI could consider conditioning the approval of any new or renewed energy ROW, where
approval is required, on the inclusion of this type of information in the agreement.

Model and standard business practices could be developed to address energy ROW durations that
the parties consider to be of significant length. For longer-duration energy ROW agreements,
tribes and energy companies could include in their agreements methods for adjusting
compensation over time, processes for resolving disputes, waivers for limiting tribal sovereign
immunity, or the ability to renegotiate issues during the term of the ROW.

Model and standard business practices could be developed to recognize the potential for
expansion of an energy ROW. Recognizing the potential for energy ROW expansion at the
beginning of negotiating an agreement could help parties select suitable transportation routes and
provide certainty that any future issues would be addressed. Up-front planning for the possibility
of expansion could provide tribes and energy companies with a step-by-step guide for increasing
partnerships around energy ROW development.




                                                                                                 26
DRAFT                                 August 7, 2006                               DRAFT


Finally, model or standard business practices for all types of energy ROW transactions could
include developing dispute resolution, mediation, or arbitration tools suited for energy ROW
issues.

c. Broaden the scope of energy ROW negotiations

Another way to address the uncertainty and lack of shared objectives that tribes and energy
companies may face in energy ROW negotiations is to recognize more explicitly the variety of
concerns that may motivate each party. Depending on the tribe and company involved,
negotiation techniques can be developed to address business and tribal concerns. For example,
companies may be concerned not only with shareholder return, but also with maintaining
standing in existing markets, increasing market share, exploring for new resources, or
diversifying resources. Similarly, tribes may have concerns beyond economic development.
Tribes may be interested in comprehensive reservation development, increasing governmental
oversight of energy ROW impacts, or protecting reservation resources.

The significance of implementing such negotiating practices can be seen in the tribes and
companies that have developed successful relationships. The Departments found that energy
ROW negotiations in these situations do not get stalled on valuation issues. This appears to be
true whether the relationship is a full energy development partnership or merely one between a
ROW grantor and ROW user. Through partnerships, acceptance of alternative valuation
methods, creative approaches to energy exploration, and recognition of the parties various
responsibilities, some tribes and energy companies have shown that it is possible to leverage
their respective resources and objectives to their mutual benefit.

d. Develop an industry-tribal ROW institute

To facilitate the options discussed above, or for other purposes, tribes, energy companies, or
other entities could establish a non-governmental energy ROW institute specifically designed to
advance and support energy ROW agreements on tribal lands. The institute could be designed for
the benefit of both tribes and energy companies. The institute could assist tribes with land
management planning, geographic information system development, energy resource
assessment, energy corridor development, and identification of environmentally or cultural
sensitive areas. For energy companies seeking to do business on tribal lands, the institute could
provide guidance on appropriate business practices and access to relevant environmental and
cultural information concerning tribal lands. The institute could also facilitate development of
standard business practices, provide training, or offer dispute resolution.

4.4.2. Options for Consideration by Congress
As discussed above, the Departments found that under existing law and regulations, difficulties
arise in ROW negotiations from time to time that are sometimes very significant to the parties.
At the same time, however, it appears unlikely that these difficulties could lead to significant
cost impacts for energy consumers or to significant threats to the physical delivery of energy
supplies to market areas.




                                                                                                  27
DRAFT                                  August 7, 2006                                DRAFT


With that perspective in mind, the Departments list below a range of options that Congress could
consider if it concludes that these difficulties merit a legislative solution. Some of these options
would involve major changes to the long-standing relationship between the tribes and the federal
government concerning tribal sovereignty and the federal policy of tribal self-determination — in
particular, the principle that tribal lands should not be alienated without a tribe’s consent.

These options should not be considered recommendations from the Departments.

a. Congress could elect no change, allowing ROW negotiations to continue under current
laws, regulations, practices, and procedures

Many comments from tribal parties and energy companies indicate that current policies for
granting and renewing energy ROWs are, in general, working. Only a small number of parties
have had significant problems arriving at ROW agreements. Option (a) would continue the
present practice, which allows tribes and energy companies to use their own methods for valuing
a ROW and to conduct negotiations on their own terms.


b. Congress could establish a legislative clarification of tribal consent

As described earlier, part of the status quo is a DOI regulation in effect since 1951 requiring
consent of the tribe before an energy ROW is authorized. Congress could emphasize the
importance of tribal consent to energy ROWs by elevating it to the legislative level by enacting a
new statute requiring that the consent of the tribe be obtained as a condition to the authorization
of an energy ROW. Such a new statute, or an amendment to the 1948 Act, would clarify that
consent is required from all tribes for an energy ROW across tribal land, not only tribes
organized under the IRA or the OIWA. Such legislation would also constitute a strong
affirmation by Congress of the principles of tribal sovereignty and self-determination..

c. Congress could authorize the federal government to determine fair compensation

Under this option, Congress could direct the executive branch to establish a federal entity to
determine fair compensation for all energy ROWs across tribal land. This entity would be
responsible for developing a valuation methodology (and the attendant regulations) to calculate
fair compensation for the use of the land. However, each party (tribes or industry) would reserve
the right to accept or reject the calculated value.

Various methods are available for calculating fair compensation. These include, but are not
limited to, the following:

     1) Case-by-case estimates of land value using the Uniform Appraisal Standards for
        Federal Land Acquisition and USPAP. These are well-known and well-understood
        methodologies that are used widely to determine the value of land for various purposes.

         For example, in the federal land appraisal process, DOI establishes a market value for
         the land under consideration. The market value is the amount in cash, or terms



                                                                                                 28
DRAFT                                August 7, 2006                               DRAFT


        reasonably equivalent to cash, for which, in reasonable probability, the property would
        have sold on the effective date of the appraisal, after a reasonable exposure time on the
        open competitive market, from a willing and reasonably knowledgeable seller to a
        willing and reasonably knowledgeable buyer, with neither acting under any compulsion
        to buy or sell. This market value gives due consideration to all available economic uses
        of the property at the time of appraisal. However, the estimate of highest and best use
        must be an economic use. A non-economic highest and best use, such as conservation,
        natural lands, preservation, or any use that requires the property to be withheld from
        economic production in perpetuity, is not a valid use upon which to estimate market
        value under these standards.

        A key consideration in establishing market value is the highest and most profitable use
        for which the property is adaptable and needed (or likely to be needed) in the
        reasonably near future. Federal agencies must show that the land is both physically
        adaptable for such use and that there is a need or demand for such use in the near
        future. The proposed use for the ROW is not a consideration.

    2) Establish a ROW compensation schedule similar to that developed and currently used
       by the Bureau of Land Management (BLM). The BLM compensation schedule sets fair
       market rent for all ROWs, eliminating the need for real estate appraisals for each ROW,
       as well as avoiding the costs, delays, and unpredictability of the appraisal process.

        The BLM rental schedule defines fee zones by county in every state except Alaska. A
        county is assigned a “zone value” based on land values in the county. Lower-value
        counties are assigned lower-numbered zone values. A county’s zone value is translated
        into a per-acre “zone rent” (ZR) by use of the adjustment formula described below. To
        calculate the annual ROW rental payment, the ZR is multiplied by the total acreage
        within the ROW.

         The formula for ZR is:

         ZR = (Zone Value) × (Impact Adjustment) × (Price Index) × (Treasury Security Rate)

         where

           a. “Zone Value” is the land value that was established for the county,.
           b. “Impact Adjustment” reflects the differences in land use impacts between
              ROWs and other potential uses of the land (e.g., development),
           c. “Price Index” allows the rental values to increase with inflation, and
           d. “Treasury Security” reflects a reasonable rate of return to the United States for
              the use of the land within the ROW.

         For example, the BLM has determined that Duchesne and Uintah Counties in Utah
         fall into Zone 2 of the ROW Rent Schedule with a Zone Value of $100 per acre.
         Wasatch County, also in Utah, falls into Zone 4, with a Zone Value of $300 per acre.




                                                                                              29
DRAFT                                  August 7, 2006                                DRAFT


           For 2006, the ZR for energy pipeline ROWs given these values is $8.01 per acre in
           Duchesne and Uintah Counties and $24.06 per acre in Wasatch County.

           The BLM rate schedule would have to be adapted to tribal lands.

Whatever method a Congressionally authorized federal entity uses to determine a fair land value
(Option 4.4.2.c (1) or 4.4.2.c(2)), it should represent the baseline value. A process for adjusting
the fair value up or down would be specified in the regulations that implement either of these
two options. Reasons for adjustment could include:

             a. Adjustment for tribal government oversight of safety, cultural, and
                environmental issues associated with the energy ROW. Calculations would be
                based on the costs to the tribal government for providing these services on tribal
                lands. Unlike a federal or state government, a tribal government is unable to tax
                facilities within the energy ROW to offset administrative costs associated with
                energy ROW management. The authorized federal entity would be responsible
                for calculating compensation adjustments on the basis of identified needs,
                benefits, and responsibilities.

             b. Adjustment for tribal benefits that may be derived from an energy ROW, such
                as access to energy resources for tribal members or tribal businesses,
                improvements to roads or other infrastructure, job opportunities, or training.

             c. Adjustment for the value associated with establishing an energy ROW across a
                large section of land in a single agreement, compared to a more piecemeal
                approach on non-tribal land.

d. Congress could require binding valuation

Congress could modify the current process for energy ROW agreements by establishing binding
procedures to resolve any impasse that may result in negotiations. Such binding procedures
might include the following:

        1) Requiring the parties to enter into binding arbitration conducted by a mutually
           approved-upon third party. The decision of the third party would not be subject to
           appeal. Either party could petition to invoke this procedure.

        2) Requiring the parties to enter into binding arbitration conducted by a third party
           selected by Congress. This decision by the arbiter would not be subject to
           administrative appeal. Either party could petition to invoke this procedure.

        3) Requiring the parties to accept fair compensation as determined by a federal entity
           using the strategy outlined in Option (c) above. In this case, the process would be
           invoked only if the parties did not reach an agreement on their own, unlike Option
           (c), where fair compensation for all energy ROWs would be determined by a federal
           entity.



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DRAFT                                        August 7, 2006                                       DRAFT




e. Congress could specifically authorize condemnation of tribal lands for public necessity

In its essence, a condemnation proceeding involves the exercise of eminent domain by the
government. It is a taking of land against the will of its owner or without the owner’s consent.
Condemnation usually requires a judicial proceeding in which some degree of public purpose or
necessity is established to the satisfaction of the tribunal, thereby overcoming the property rights
of the landowner.

The Supreme Court has recognized that, as a sovereign government, the United States must have
the power of eminent domain.119 Eminent domain allows the United States the right to take lands
that it determines are necessary for some public use.120

This right is recognized in 25 U.S.C. § 341, which states:

        Nothing in this act [The Indian General Allotment Act of 1887] contained shall be
        so construed as to affect the right and power of Congress to grant the right of way
        through any lands granted to an Indian, or a tribe of Indians. . . . for the public
        use, or to condemn such lands to public uses, upon making just compensation.

It is important to note that no legislation authorizes the condemnation of Indian tribal lands in
specific terms.

Congress may exercise its plenary power over Indian affairs and manifest its intent to impose
projects on Indian lands thereby effectuating a condemnation. Numerous district court decisions
prior to the Indian Civil Rights Act and the Indian Self Determination Act have held that an
appropriation act that appropriates money for a specific project will manifest a clear intent to
engage in the project.121 The clear and precise intent expressed by Congress in an appropriations
act, when considered with the General Condemnation Act, may furnish authority for taking land
within an Indian Reservation.122




119
    United States v. Carmack, 329 U.S. 230 (1946).
120
    Id.
121
    United States v. 40 Acres of Land, 162 F. Supp. 939, 940 (D. Alaska 1958); United States v. 5,677.94 Acres of
Land, 162 F. Supp. 108, 110-111 (D. Mont. 1958).
122
    United States v 5,677.94 Acres of Land, 162 F. Supp. 108, 110-111 (D. Mont. 1958).


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5. Analyses of Negotiations and Compensation Paid
   for Energy ROWs on Tribal Land
5.1.    Background
For the reasons described in Section 1.2 above and Section 5.3 below, the Departments relied on
a case study approach to shed light on past and present determinations of energy ROW
compensation. The Departments recognize concerns that the case studies would be mere
“snapshots in time” that did not adequately represent the context within which the ROW was
granted or renewed. The Departments appreciate the efforts of tribal parties and industry parties
who volunteered case studies for review, conducted ROW surveys, and submitted information on
specific ROWs.

5.2.    Case Study and Survey Process
The Ute Indian Tribe of the Uintah and Ouray Reservation, the Morongo Band of Mission
Indians, the Southern Ute Indian Tribe, and the Navajo Nation agreed to participate in the
Section 1813 study and allowed energy ROW agreements on their lands to serve as case studies.
The Departments contracted with Historical Research Associates, Inc., (HRA) to visit each
volunteer and develop case study reports. The Southern Ute and Navajo Nation cases were
supplemented with documents provided by El Paso Western Pipelines.

These case study reports are summarized in Section 5.4. The complete HRA report is included as
an appendix to this report.

EEI and INGAA volunteered to survey their membership for information on energy ROWs on
tribal land. To the extent permitted by the availability of documents, the Departments reviewed
the source documents used to compile survey results to assess the accuracy of survey reporting.
Results of those surveys are described in Section 5.5.

In addition to the HRA case studies, several tribes and utilities provided information on their
experiences with energy ROWs. Several of those submissions are summarized in Section 5.6.

5.3.    Limitations on Historical Analysis
5.3.1. Number of Energy ROWs on Tribal Land
A complete historical analysis of energy ROW compensation on tribal lands was not possible
because of the number of energy ROWs on tribal lands and the diffuse locations of ROW
records. The exact number of energy ROWs on tribal land has not been calculated, but a few
examples can illustrate the scope of ROWs.

The Confederated Salish and Kootenai Tribes reservation hosts 325 miles of ROWs for
11 regional electrical transmission lines, 150 miles for local electrical transmission lines, more
than 2,000 miles for local electrical distribution lines, and 56 miles for a regional refined fuels




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pipeline.123 The Shoshone-Bannock Tribes of the Fort Hall Reservation have 22 energy ROWs:
19 for electric transmission lines and 3 for natural gas lines.124

EEI reported that its members anticipate having to renew 271 ROWs over the next 15 years.125
The Public Service Company of New Mexico indicates that approximately 95 ROWs involving
various tribes will be subject to renewal over the next 15 years.126 These energy ROW renewals
include high-voltage transmission lines, high-pressure natural gas lines, and low-level
distribution and gas lines.

The historical analysis of energy ROWs on tribal land is further complicated by the diversity of
locations of ROW records. Energy ROW information is held in various industry, BIA, and tribal
offices across the country.

5.3.2. Difficulty of Comparing Energy ROWs
Even if compiling a complete and detailed historical inventory of energy ROWs on tribal land
was possible, an analysis of compensation rates might only have marginal benefit as a result of
the significant differences among energy ROWs. Even when limited to electric transmission
lines and natural gas and oil pipelines, these energy ROWs have been established pursuant to a
variety of legal authorities. In addition, energy ROWs vary in their duration, size, renewal rights,
and valuation methods. Other factors that complicate an across-the-board analysis are the
financial and environmental risks associated with specific energy ROWs, additional facilities
built on or related to the energy ROW, and land use. The impacts of the energy ROW on cultural
resources and areas of significance can also affect energy ROW costs. Energy ROW
compensation will also differ on the basis of agreements as to who is responsible for security and
emergency responses and whether the energy ROW includes tribal energy development or
provision of energy services.

5.3.3. Confidentiality of Energy ROW Information
Undertaking a historical analysis of energy ROWs is also complicated by the fact that ROW data
may be confidential business information, subject to confidentiality agreements in some cases.
Energy companies also expressed concern that their participation in the study could negatively
affect ongoing or future tribal relationships.

5.4.    Formal Case Studies
As noted, four tribes responded to the Departments’ request for case study volunteers, and a
contractor, HRA, was brought in to develop the case study reports. HRA historians, accompanied
by DOI personnel, visited each reservation included in the study and examined tribal and BIA
records pertaining to energy ROWs. Information on the ROWs located on Southern Ute and
Navajo Nation Tribal land was supplemented with documents from the files of El Paso Western
Pipelines in Colorado Springs, Colorado. HRA complied with all requests for confidentiality of
information. The following are summaries of HRA’s case studies.

123
    Comments of the Confederated Salish and Kootenai Tribes of the Flathead Nation 2 (April 25, 2006).
124
    Comments of the Shoshone-Bannock Tribes 8 (May 12, 2006).
125
    Comments of the Edison Electric Institute, survey addendum, 5 (June 21, 2006).
126
    Comments of the Public Service Company of New Mexico 1 (May 15, 2006).


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5.4.1. Ute Indian Tribe of the Uintah and Ouray Reservation
The Ute Indian Tribe of the Uintah and Ouray Reservation (Northern Ute) is located in the
Uintah Basin of northeast Utah. The Northern Ute Reservation now covers more than four
million acres. The reservation includes high mountain desert and vegetated mountain ranges. It
spans several oil and gas fields.

The Northern Ute received its first oil royalties in 1949. The Tribe functioned in the 1960s as an
approver of ROW fees that were negotiated by the BIA. It assumed a more active role in
negotiating ROW compensation in the following decades. By 2005, the Tribe established its own
energy company, Ute Energy, to develop tribal oil and gas resources. As illustrated in the
following examples, ROW compensation increased as the Tribe became more actively involved
in negotiations.

a. ROW No. H62-1989-070

In 1960, the Tribal Business Committee approved a 2.4-mile-long, 100-foot-wide ROW for a
138-kV line. ROW compensation was a damage fee of $764. The term of years for the ROW is
unknown, and records do not indicate whether a real estate appraisal was made.

b. ROW No. H62-1978-005

In 1978, a utility company offered the Tribe $100 per acre to construct a 69-kV line over
3.78 acres of tribal land. An appraisal conducted by the BIA determined that $378 was just
compensation for the ROW, since the highest and best use of the land was dry grazing and since
other land used for that purpose sold for between $50 and $200 per acre a year earlier. The
appraiser determined that compensation should be less than the full fee simple value of the land
since the land surface was minimally disturbed and the landowners retained the bulk of their
rights. The BIA collected the $378 in May 1978, and the power line was completed in June 1978.
The grant of easement was executed in January 1980, with a 50-year term beginning in
April 1978.

c. ROW No. H62-1983-18

In November 1982, the Tribe was offered $500 per acre for 8.55 acres of tribal land for a 12-inch
natural gas transmission line. The Tribal Business Committee authorized the 20-year ROW on
the condition that the $500-per-acre offer actually met or exceeded market value. The committee
also directed that the grant of easement include five-year reviews to determine if damage
payments should increase, and it indicated that increases would depend on compliance with
ROW stipulations or current economic conditions.

The land appraisal, completed a year after the ROW was authorized and the pipeline was
constructed, found that the $500-per-acre offer was appropriate given real estate values in the
area and that the bulk of the rights would be retained by the landowners. In 2003, the company
applied for ROW renewal offering to pay damages and compensation as determined by DOI. No
further information is available on the ROW renewal or compensation, but the pipeline is
included on a 2006 tribal map showing FERC-regulated pipelines.


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d. ROW No. H62-1992-80

In 1991, a company wished to cross four miles of tribal lands with two 10-inch interstate natural
gas pipelines and construct a compressor station and four natural gas gathering lines for a total of
28.5 acres. The company suggested a 30-year ROW but did not offer a compensation rate. It later
offered $2,000 per acre for a 25-acre easement and $4,500 for a five-year business lease for the
compressor site, in addition to the $250 it had earlier given the tribal scholarship fund.

The Tribal Business Committee proposed basing the ROW fee on throughput. The company
declined for the reasons that it had never provided compensation on such a basis before, only 2%
of the pipeline crossed tribal lands, and it would be impossible to finalize contracts in the two
weeks remaining before construction started. The company countered with an offer of $2,500 per
acre, an additional contribution to the scholarship fund, and a joint venture with the Tribe on the
gathering lines. The Tribe refused and again suggested a throughput fee or a joint venture as an
alternative.

The company again rejected the throughput proposal, stating that it had already established fixed
transportation and gathering rates for its consumers and would not be able to adjust them to
recover the additional throughput costs. The company indicated its interest in a joint venture in
the future but not at the present time because of time constraints. It offered $3,000 per acre for
the pipeline and compressor station with a 20-year term, $1,325 per acre for the gathering lines,
and a $25,000 contribution to the scholarship fund. The company also stated it would ask its
contractors to employ 35 to 40 members of the Tribe on construction projects. Complete terms of
the ROW agreement are not available, but the Tribe received $238,537 as payment for the
pipeline, compressor station, and gathering lines for a 20-year ROW.

5.4.2. Southern Ute Indian Tribe
The size of the tribal estate is presently estimated at 308,000 acres. Since the 1950s, oil and gas
have been the key economic resources for the Southern Ute. Located within the San Juan Basin,
the Tribe’s lands contain oil and gas reserves and coal beds.

In the 1950s and 1960s, the Tribe generally accepted the BIA’s recommendations on the
adequacy of compensation for energy ROWs. Compensation in those decades usually consisted
of appraisals of surface damage fees on a per-acre or per-rod basis. In the 1970s, the Tribe
became more involved in oil and gas leasing, and in 1980, the Tribal Council formed an Energy
Resource Office to facilitate gathering information on the Tribe’s energy potential and
monitoring compliance with existing leases. The forms of ROW compensation became more
varied and included contributions to scholarship funds, annual rental fees, land trades,
throughput fees, and investment opportunities.

In the 1990s, the Tribe formed the Red Willow Production Company to operate oil and gas wells
and leases and the Red Cedar Gathering Company to pursue coal-bed methane gas production.
By this point in time, compensation negotiations were conducted between the Tribe and energy
companies, and the Tribal Council would accept or reject ROW proposals. The BIA would then



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approve the ROWs to which the council consented. Appraisals were seldom done, since the
Tribe established general compensation rates for particular types of ROWs.

Red Willow Production Company and Red Cedar Gathering Company are managed by the
Southern Ute Growth Fund, which estimated its investment value at more than $2 billion in
2006. The following four cases studies demonstrate the movement the Tribe made in managing
its energy resources from the 1950s to the present day.

a. Western Slope Gas Company

In 1961, the Western Slope Gas Company offered damages of either $1 per rod or $320 per
lineal mile for a 50-year, 50-foot-wide ROW for a natural gas transmission pipeline and
gathering system. Subsequent applications that year for additions to the gathering system were
also for a 50-year term at the $1-per-rod rate. The Tribal Council consented to the applications at
the $1-per-rod rate.

b. Mid-American Pipeline Company

By the late 1970s, the Tribe became directly involved in ROW compensation negotiations. The
Mid-America Pipeline Company offered $15.60 per rod for a 10-inch liquefied petroleum gas
pipeline crossing almost seven miles of tribal land. Total compensation under the offer was
$33,571. After the Tribe rejected the offer, Mid-America proposed $15 per rod and donations to
the scholarship fund, for a total compensation package of $56,203. The Tribal Council eventually
approved a 10-year easement for payment of $32,280 and other considerations, which totaled
$50,000 in contributions to the scholarship fund.

By the mid-1980s, Mid-America and the Tribe were involved in renewal negotiations. The Tribe
rejected the Mid-America proposals for either a permanent easement at $28 per rod or $140,000
for a 20-year term with an option to pay $20,000 annually thereafter for as long as the company
chose to renew the ROW. Mid-America noted that it had paid from $5 to $20 per rod for
permanent ROWs on non-Indian land in the vicinity.

The Tribe countered with offers based on a rate-based tariff fee. Under this valuation method,
compensation could be up to $236,200 for a 10-year term and $497,000 for a 25-year term. Mid-
America instead proposed a perpetual easement for a lump sum and annual contributions to the
scholarship fund; the amounts offered are not contained in available records. The Tribe
suggested compensation of $374,810 for a 25-year term, which was based on Mid-America’s
expected profits, but paid as an annual rental based on the pipeline’s projected throughput.

Negotiations for a renewal began in 1985, five years before the expiration of the grant of
easement. No agreement had been reached by the time the ROW expired in October 1990, and
the Tribe declared it would not hold Mid-America in trespass as long as negotiations were
conducted in a good-faith manner. In late 1991, the two parties agreed to $425,000 for a 10-year
ROW, plus the guarantee of a tax credit in case the tribe should later impose an applicable
"possessory interest tax or business opportunity tax."




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In 1996, the parties entered negotiations on the ROW renewal and an additional 16-inch pipeline.
Tribal and Mid-America representatives agreed to a formula that multiplied the previous renewal
amount by the consumer price index (all urban consumers), resulting in compensation of
$518,000 each for the renewal and the new easement ($320 per rod).

c. El Paso Natural Gas Company

In 1956, EPNG compensated the Tribe $4,250 for damages for a 20-year, 6.647-mile ROW for a
24-inch natural gas pipeline (the El Paso mainline). EPNG’s payment was double the estimated
damages.

In its 1974 renewal application, EPNG indicated that the ROW would expire at the end of 1976.
In 1976, the company submitted a second renewal application since no action had been taken on
the first. In subsequent negotiations, EPNG offered $3 per rod for 20 years for all its projects
(i.e., projects in addition to the mainline) that were expiring in 1978 and 1979. The Tribe refused
the offer on the grounds that it was receiving $5 per rod for other primary ROWs and that it was
due damages for EPNG’s trespass. Agreement was reached in 1979 granting EPNG a 10-year
easement for all its ROWs on the Reservation that had or would expire before January 1, 1982,
for a payment of $607,515. Three years later, EPNG requested a waiver of the annual 20%
increase in per-rod costs because of decreased sales and inflation that was lower than expected.
The Tribe rejected the request.

In January 1989, EPNG applied for renewal of the ROWs renewed in 1979 and submitted
payment of $349,326, which it based on a Tribal Council resolution requiring $600 per acre for
ROW renewals. The Tribe refused the offer and requested compensation based on alternative
valuations such as throughput. The Tribe requested $2,638,000 for a 10-year renewal. EPNG
countered with an offer of $966,933. The final agreed-upon figure was $1.3 million for a 10-year
renewal of the ROWs.

EPNG applied in May 1998 for a 20-year renewal of the mainline ROW, due to expire in
February 2000, and included payment of $77,289 for 96.611 acres based on an appraisal of $800
per acre. The company subsequently proposed 10 annual payments of $25,122 per year, or a
lump sum of $303,507. Negotiations were not concluded until March 2000. The agreement
called for EPNG to assign its Colorado Dry Gas Gathering System to the Tribe and for the Tribe
to pay EPNG $2 million and provide renewed 20-year ROWs for the El Paso Field Services
Blanco Gathering System and the mainline facilities.

d. Red Cedar Gathering Company

In an effort to expand the pipeline infrastructure required to expedite development of its coal-bed
methane resource, the Tribe issued a blanket 11-year grant to WestGas for all ROWs necessary
for constructing and operating gathering systems and pipelines in the western part of the
Reservation. ROW compensation consisted of a throughput fee of $0.015 per million Btu on all
gas compressed and processed in a defined area.




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When the Public Service Company of Colorado decided to sell WestGas in 1994, the Tribe
entered into partnership with an investment group, Stephens Group, Inc., to bid on it. The bid
was initially rejected but then reconsidered when it was made clear that the Tribe would have to
consent to the transfer of easements from WestGas to the winning bidder. The partnership
bought WestGas for $87 million, and Stephens and the Tribe created the Red Cedar Gathering
Company, a joint venture. Stephens contributed all of WestGas’s assets to Red Cedar, and the
Tribe contributed $5 million and an extension of WestGas’s existing ROWs to the end of 2036.
The throughput fee was also increased to $0.0175, with subsequent upward adjustments to be
made in 2009 and every five years thereafter, as long as the adjustments were in Red Cedar’s
best interests. The blanket grant was also extended from the previously defined area to all tribal
lands.

5.4.3. Morongo Indian Reservation
The Morongo Band of Indians is one of several linguistically related tribal groups in south-
central California collectively referred to as the Cahuilla. The Morongo Reservation was created
in 1877 by Executive Order. The size of the reservation grew and got smaller with subsequent
Executive Orders and allotment activity. In 2003, the reservation encompassed 31,115 acres, of
which 32,402 acres were tribal lands. The Morongo Band did not organize under the IRA.

The Morongo Band’s reservation possesses no oil, gas, or mineral resources. Nevertheless, the
Band has numerous energy ROWs. The reservation’s location in southern California is an ideal
east-west corridor for transmission of natural gas, oil, and electricity. Beginning in 1995, the 50-
year term of some electric and transmission line ROWs are due to expire, and renewal
negotiations are currently underway.

The degree of tribal involvement in negotiations for the initial energy ROWs is unclear from
BIA and Tribal records. Appraisals were used to determine compensation for some ROWs, but
there are also instances of the Tribe exploring alternative forms of compensation.

a. ROW No. 372-Morongo-15

In 1946, the Southern California Gas Company and the Southern Counties Gas Company of
California were granted a ROW for a 30-inch gas pipeline at a rate of $99.75 per acre for the
8.02-acre easement. In 1966, the Tribe requested that Southern California Gas Company provide
gas service to the Reservation. The company did so in 1968, in exchange for obtaining renewals
of the 30-inch pipeline in addition to another ROW and for receiving a new ROW for a 36-inch
natural gas pipeline. The estimated cost of the gas system installed by Southern California Gas
Company was $82,078.

b. ROW No. 378-Morongo-143

In April 1945, representatives from the BIA and Southern California Edison (SCE) attended a
general meeting of the Morongo Band to discuss SCE’s plans to build a transmission line
connecting Boulder Dam to Los Angeles. Two months after the meeting, the DOI granted SCE
authority to construct the line. The Morongo Band, BIA, and SCE were negotiating



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compensation for the ROW as the transmission line was being built. The Morongo contested
BIA’s appraisal of $25 per acre.

In November 1945, SCE requested permission for two transmission lines and a road across the
Morongo Reservation. Damages were estimated at $6,421.50, and the BIA required an annual
payment of $5 per mile. SCE agreed to pay the damages fee but balked at the annual fee. The
Morongo Band pushed for payment of the annual fee and continued to protest the $25-per-acre
appraisal, at one point suggesting to DOI that $100 per acre was the appropriate land value.

The final compensation schedule for the transmission lines totaled $6,421.50 (39 towers at $25
per tower; $25 per acre for dry land; $637.50 for 2.49 acres of irrigated land) and a $5-per-mile
annual rental for an unspecified number of years. In May 1950, SCE submitted a license
application to FERC’s predecessor, the Federal Power Commission (FPC), for the transmission
line. The 50-year license was issued in April 1954 but with a starting date of July 1, 1945.

SCE initiated the renewal process in 1992, three years before the ROW expiration date. The
Morongo Band asserted that the FPC license, which also had a 1995 expiration date, could not be
renewed by FERC, the successor agency to FPC, because the line was no longer a primary line
and therefore no longer under FERC’s jurisdiction. The Morongo Band reported that it had to
threaten SCE with litigation to remove the line before SCE would agree to enter negotiations
with it. Both parties have since entered into an agreement that calls for negotiations to begin in
2008 and conclude by 2010.

c. ROW No. 378-Morongo-47

When the California Electric Power Company (CEPC) applied for a 150-foot ROW for two
115-kV transmission lines on 4.73 acres of the Reservation in 1959, the Morongo Band
suggested that the company provide electric service to reservation homes in addition to a damage
fee. CEPC was amenable to this and offered payment of $21,000 and provision of a distribution
system to allotted lands, on the condition of receiving ROWs for the distribution lines. CEPC’s
$21,000 payment was based on an appraisal of $400 per acre, which the appraiser reduced by
40% on the basis that the land did not have potential for subdivision or commercial development.
BIA’s appraisal valued the land at $13,250, which was 50% of appraised fair market value of the
fee title. The Morongo Band accepted the company’s offer.

In 1963, SCE acquired CEPC’s power lines and increased the voltage of one line to 230 kV,
apparently with the approval of BIA. At some point, SCE installed fiber-optic lines on the ROW
for its own use. In the late 1990s, SCE requested a ROW amendment to allow it to sell its excess
fiber-optic capacity. The amendment was agreed to for a lump-sum payment of $535,000.

d. ROW No. 378-Morongo-277

SCE’s 33-kV Banning-Palm Springs electric distribution line had been FPC-licensed since 1929.
After the FPC determined that the line was no longer a primary line, SCE applied for a 25-foot,
4.02-mile ROW for the line in 1969. In keeping with its BIA-approved practice of valuing
easements at 50% of market value for lines of voltages less than 220 kV, SCE offered $7,155 for



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approximately 12.19 acres. It also estimated severance damages at $1,500. The BIA stated that
the appraisal was adequate compensation but noted that nothing was constraining the Morongo
Band’s free-bargaining position.

In a special election, the Morongo Band approved granting SCE 50-year ROWs for a 220-kV
transmission line and 12-kV and 33-kV distribution lines. The lump-sum payment was $153,660.

5.4.4. Navajo Nation
The Navajo Nation covers more than 16 million acres on the Colorado Plateau of northeast
Arizona, southeast Utah, and northwest New Mexico. The tribal council, the legislative branch of
the Navajo Nation, is composed of 88 popularly elected members.

The bulk of the Navajo Nation tribal income in the 20th century derived from energy-related
mineral leases for its natural gas, oil, coal, and uranium resources. Income from oil and gas
averaged $70,000 per year from 1921 to 1937 and rose to $1 million per year from 1938 to 1956.
In the 1960s, annual averages for oil and gas income were $18 million. In the 1970s, the Navajo
started moving away from fixed royalties as the price of fossil fuels increased worldwide.

The Navajo Nation Oil and Gas Company (NOG) was chartered by the Navajo Nation Council in
1998. Five years later, NOG was allowed to develop energy resources on tribal lands by granting
new oil and gas leases. From 1978 to 2003, all new energy resource development offers had been
refused in anticipation of the right time to exploit the Nation’s resources.

As energy ROWs came up for renewal in the 1970s and 1980s, the Navajo Nation and energy
companies negotiated consolidated easements that incorporated a number of ROWs into one
package. Since the 1980s, it has been the Nation’s practice to negotiate directly with ROW
applicants.

a. Four Corners Pipeline

Four Corners Pipe Line Company (Four Corners) applied to BIA and the Navajo for an easement
for a 16-inch oil pipeline in April 1957 and received it in May 1959. The Navajo participated in
the application approval process and, at one point, withdrew its consent to the application until
stipulations agreed to earlier were included in the agreement. One of the stipulations called for
damages of $1 per lineal rod. Damages payment for the 20-year easement for 230 miles of
pipeline and other facilities totaled $199,796.

Twenty-six miles of the pipeline fell across lands subject to a land dispute between the Hopi
Indians and the Navajo. Four Corners paid each tribe $10,000 for the 26-mile segment.

In April 1976, Four Corners applied to renew the ROW, set to expire in May 1977. The BIA,
indicating that current market value was $3 per rod, rejected the company’s initial offer of $2 per
rod. Although Four Corners responded with an offer at the higher rate, the ROW was not
renewed.




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In February 1980, Four Corners requested an easement consolidating all of its ROWs on Navajo
Nation lands. The subsequent 1981 agreement between the Navajo and Four Corners renewed all
of the company’s prior ROWs, both expired and unexpired.

Payment for the consolidated renewals was primarily based on throughput of hydrocarbons in the
main line at 3 cents per barrel, adjusted annually on the basis of the CPI. The first year’s
payment was not to be less than $250,000 for 1981. Four Corners also paid $900,000 for the
period in which the mainline was in use but the ROW had expired. In return, the Navajo released
the company from liability during that trespass. Four Corners further agreed to pay for actual
damages caused by pipeline construction or operation.

In 1998, Questar Southern Trails Pipeline Company (Questar) purchased the Four Corners
pipeline with the intent to convert it from oil to natural gas. Since this change required additional
construction, the 2001 agreement between Questar and the Navajo Nation to re-renew the 1981
ROW also included Navajo consent to additional ROWs for the necessary construction.

The 2001 20-year ROW agreement called for undisclosed compensation in the form of 20 annual
installments, with all payments after the first adjusted annually according to the CPI; annual
contributions to the Navajo Nation Scholarship Program; and installation of up to six taps for
delivery of gas on the reservation.

b. Arizona Public Service 500-kV Line

The Arizona Public Service (APS) transmission line described in this case study runs from the
Four Corners steam generating plant in New Mexico to a substation near Boulder City, Nevada.
The line runs across Navajo land and passes through the Hopi Reservation before running again
on Navajo land.

Final approvals for the Navajo sections of the line were granted in March 1967 for a 25-year
term with an option to renew for a “like term.”127 The Navajo were involved in the approval
process.

In March 1992, APS applied to renew the 500-kV ROW. It submitted a payment very similar to
the one that it paid for the initial grant but also indicated its willingness to discuss other
considerations for the renewal. The Navajo rejected compensation at the same rate as the initial
grant and appointed a negotiation team to seek different terms. The BIA suggested that the APS
appraisal of $4.73 to $4.76 per rod was significantly short of the “going rate,” which was a
minimum of $45 per rod.128

By late December of 1993, the Hopi Nation and the Navajo Nation were part of a confidentiality
agreement with SCE to negotiate the ROW renewal. SCE was involved because it had the right
to use the entire capacity of the transmission line. A task force was established in 1994 to


127
    Historical Research Associates, Inc., Historic Rates of Compensation for Rights-of-Way Crossing Indian Lands -
1948-2006, 123 (July 7, 2006).
128
    Id. at 125.


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negotiate the ROW renewal with APS, SCE, the City of Los Angeles Department of Water and
Power, and the Public Service Company of New Mexico.

The Navajo Nation requested BIA to return to APS any payments it had made for the ROW
renewal because they were not acceptable. The ROW has not yet been renewed.

c. Transwestern Pipeline Company, San Juan Line

Transwestern Pipeline Company (Transwestern) began operation of a 30-inch natural gas
pipeline on the Navajo Reservation in 1960, added compression facilities in 1967, and began
building loop lines in 1969. By 1980, the capacity of the Transwestern system on Navajo land
was 750,000 mcf per day. Information on the initial ROW grant is not available, but it was set to
expire in October 1979. Transwestern submitted a ROW renewal application to BIA in 1979,
and, in the absence of a definitive response, submitted another in 1981.

It is not clear what followed, but in 1984, Transwestern and the Navajo Nation developed a
memorandum of understanding (MOU) that allowed Transwestern to renew its expired ROWs
and to extend its unexpired ROWs to a new expiration date of December 2003. The parties also
reached agreement to an undisclosed settlement amount.

Transwestern and the Navajo Nation agreed to a subsequent MOU in 1991 that allowed the
company an option to acquire 79,507 miles of additional ROWs. Under the MOU, 25% of the
consideration would be paid as a nonrefundable payment with the remainder (of the fee), paid
when Transwestern exercised its option to acquire ROWs, adjusted according to the CPI and the
actual size of the ROWs. The MOU committed Transwestern to sell and deliver up to 3,000 mcf
of natural gas to the Navajo Nation upon completion of a service agreement.

In 1998, Transwestern began the process of renewing its easements scheduled to expire at the
end of 2003. The company sought one grant to cover all its easements on Navajo Nation trust
land. An independent appraiser estimated that the market value of the affected land ranged from
$10.69 to $14.40 per rod. The BIA recommended instead that the fair market value of the land
was $25 per lineal rod.

By May 2001, Transwestern and the Navajo Nation were unable to resolve ROW renewal terms
and conditions and instead signed an agreement extending the ROWs to November 2009.
Payment for the extension was to be made in an initial installment followed by six annual
payments based on the CPI and adjusted upward but not decreased. The 2001 agreement was
amended in 2004 to allow Transwestern to construct a new 36-inch, 21,415-rod pipeline, the
easement for which will also expire in 2009.

d. El Paso Natural Gas Company, San Juan Line

The EPNG pipeline system on the Navajo Nation land may be the largest network of energy
ROWs on tribal land. The company’s pipelines also cross lands of the Southern Ute, Laguna
Pueblo, Acoma Pueblo, Gila River, Tohono O’odham, and San Carlos Apache.




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EPNG’s first ROW on Navajo land was for a 218-mile, 24-inch natural gas pipeline. The
application filed in July 1950 offered $1 per rod ($320 per mile) in damages, in addition to any
actual damages caused by construction on agricultural or forested lands. No additional
information is available on that transaction.

EPNG expanded its operations in the 1950s and 1960s to include sections of loop line at 24, 30,
and 34 inches in diameter. In 1971, EPNG applied for renewal of the main line and the loop lines
in addition to other ROWs. The company sought to combine the ROWs even though expiration
dates ranged from 1972 to 1986.

An appraiser for EPNG established the fee simple market value at $25 to $670 per acre,
depending on the land type. The appraiser then discounted those values by 50% on the basis that
the ROWs accounted for only about 50% of the land’s value. The appraiser also stated that 8% of
the value of the land taken would be a fair rental rate for the land. These calculations put the
value of the ROWs at $50,769. The BIA recommended a value of $125,272 after reviewing that
appraisal.

The ROWs in question were eventually renewed as two consolidated ROWs. Total compensation
for the renewals was $260,000 for tribal and allotted land. One of the new ROWs had a 14-year
term, expiring in 1986, with an option to renew for an additional 20 years. Consideration for the
20-year renewal would be $276,000, adjusted every five years on the basis of the CPI. The other
new ROW did not include similar renewal provisions.

Negotiations to renew these ROWs began in January 1982, four years before their expiration
date. The Navajo sought an agreement based on throughput, which EPNG opposed. At some
point, the parties seemed to agree to a payment of $600,000, but they disagreed as to what the
payment covered. The Navajo claimed that the $600,000 covered only one ROW, but EPNG
asserted that it covered both. The Nation further believed that EPNG had agreed to renegotiate
consideration for all its ROWs.

The final agreement to resolve these issues required an initial $2 million payment to the Navajo
Nation and 20 annual payments of $1.35 million, adjusted every three years on the basis of the
CPI. Under the agreement, EPNG was allowed to acquire 15 miles of gathering lines. Rather
than consolidating all of EPNG’s ROWs into one easement, the agreement divided the renewals
into several different easements.

When EPNG submitted the official renewal applications in 1985, it included appraisal
information estimating the value of the land at $15 per rod. The BIA noted that the rate for other
pipelines ranged from $20 to $40 per rod but that the per-rod rate under the recent renewal
agreement came to almost $78.

In the ensuing years, EPNG and the Navajo have negotiated amendments to the 1985 agreement,
which expired in October 2005. The easements have been extended to December 31, 2006.




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5.5.    Survey Information
Edison Electric Institute and the Interstate Natural Gas Association of America conducted
surveys inquiring into their members’ experiences negotiating energy ROWs on tribal lands.
Reports on their survey findings are available on the 1813 Web site.

5.5.1. Edison Electric Institute
EEI is a trade association for shareholder-owned electric utility companies. EEI reported that its
members provide electric service to 71% of all electric utility customers in the country and
generate almost 60% of the electricity produced by the nation’s generators.

In its survey, EEI sought information about costs, terms, and conditions of energy ROW
renewals; data on the appraised value of lands included in the ROW; comparative data about the
terms and conditions of the ROW contract that immediately preceded the renewed ROW
contract; and the information on the methodology used to determine the renewal cost. Member
companies were asked to concentrate on energy ROW renewal transactions occurring within the
past five years. EEI aggregated survey results to protect the confidentiality interests of all parties
involved.

At the request of EEI, findings from the surveys were independently assessed. This assessment
consisted of comparing source documents, supplied by the companies, to the survey responses
and the aggregated data. EEI corrected the few differences that were found and then
re-aggregated the data and revised the report. Since several of the energy ROW renewals
included in the survey had occurred more than five years ago, EEI revised its report to present
findings of the full data set (which included all energy ROW renewals) and the 2001–2005 data
set (which included only renewals that occurred during that time span).

EEI’s original and revised reports are available on the website. The following data were
extracted from the revised report dated June 21, 2006, unless otherwise noted.

A preliminary EEI screening survey of its 75-member base revealed that 28 companies had
jurisdictional territories that overlapped tribal reservation lands; 20 of those 28 companies had
ROWs on tribal land. Eight of the 20 companies had completed renewal transactions within the
past five years, and only one out of the eight declined participation in the survey. Information
was gathered on 20 energy ROWs, seven of which were renewed prior to 2001.

The survey data show that, on average, energy ROWs are being renewed for a shorter term of
years than the ROWs that preceded them. As shown in Table 1, this was true for ROWs renewed
since 2001 and for the ROWs in the entire data set.




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            Table 1 Term of Years of Energy ROW Renewals and Prior Term of Years
            Data Set             Number of ROWs                   Duration in Years
                                                        Average       Median           Range
   2001-2005
     Term of Expiring ROW               12                48            50             20-50
     Term of Renewed ROW                12                31            25             20-50
   Full
     Term of Expiring ROW               20                43            50             20-50
     Term of Renewed ROW                20                28            25             10-50


To assess the ratio of energy ROW renewal compensation to the fair market value of the land,
EEI had to calculate the fair market value of the land. In that process, EEI took into account the
variation in terms of years of the renewals and whether the fair market value of the energy ROW
was presented in a survey response as fee simple or easement.

Energy ROW prices were adjusted to reflect a usable life of 50 years. For example, a 25-year
renewal compensated at $2 million was normalized to $4 million for 50 years. When land value
was presented in a survey as fee simple, it was discounted by 50% in one calculation and 70% in
another to obtain the easement value.

On the basis of a 50% discount, the average multiple of fair market value was 31 for energy
ROWs renewed within the last five years; the average multiple was 21 on the basis of a 70%
discount. The average multiples for the full data set were 115 on the basis of the 50% discount
and 83 on the basis of the 70% discount. When an outlier (1,624 times the fair market value) was
dropped from the full data set, the average multiples were 31 and 23, respectively. These
averages, medians, and ranges of multiples of fair market value for energy ROW renewals are
presented in Table 2.




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                   Table 2 ROW Renewal Compensation as Multiple of Fair Market Value
                                                                         Multiple of Fair Market Value
              Data Set               Number of ROWs
                                                                                 of 50% / 70%
                                                                    Average     Median           Range
       2001-2005                              12                    31 / 22       8/6         1–150 / 1–107
                                                                                                1–1,625 /
       Full                                   19                    115 / 83     12 / 8
                                                                                                1–1,161
       Full minus outlier                     18                    31 / 23      10 / 7       1–150 / 1–107

Of the 12 energy ROW renewals completed within the past five years, when easements were
assessed at 50% of the fee simple value, the fair market value was paid in two cases, was
between 2 and 4 times the market value in four cases, and was between 11 and 25 times in three
cases; also, in three cases, compensation was between 65 and 150 times fair market value. When
the easement value was assessed at 50% of the fee simple value for the full data set, the fair
market value was paid in two cases, was between 2 and 4 times in five cases, and was between
11 and 25 times in five cases; also, in five cases, compensation was between 65 and 1,625 times
fair market value.

When information was available on the compensation paid for the energy ROW preceding the
renewal described in the survey response, EEI calculated the multiple of the renewal price to the
preceding price. Table 3 conveys the results of that analysis. As EEI pointed out in its report, the
findings in Table 3 are based on relatively few data points.

                         Table 3 ROW Renewal Cost as Multiple of Previous ROW Cost
              Data Set               Number of ROWs                                Multiple
                                                                    Average        Median          Range
       2001–2005                               5                       779           227          18–2,767
       Full                                   11                       863           227          10–3,812


A fourth measure of energy ROW renewals was per mile cost. EEI reported that the traditional
all-inclusive cost (i.e., ROW and construction) of high-voltage, overhead transmission facilities
are about $500,000 per mile for rural land and about $1,000,000 per mile for suburban land.
Lower-voltage transmission and distribution lines generally are hundreds of thousands of dollars
per mile.129

The average per-mile cost of ROW renewals was $893,700 for respondents in the 2001–2006
data set and $727,400 for respondents in the full data set. When per–mile costs are normalized
over a 50-year term, the average is $1,494,900 for renewals in the past five years and $1,366,000
for renewals in the full data set. Additional data on per-mile costs of renewals is provided in
Table 4.

129
      Comments of the Edison Electric Institute 9 (May 15, 2006).


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                         Table 4 ROW Renewal Costs on a Per Mile Basis
      Data Set        Number of ROWs                          Per-Mile Cost ($)
  2001-2005                                    Average         Median             Range
   Unadjusted                 11               893,700         140,500       12,800–7,300,000
   Normalized                 11              1,494,900        280,900      12,800–10,400,000
  Full
   Unadjusted                 18               727,400         146,200       12,800–7,300,000
   Normalized                 18              1,366,000        318,900      12,800–10,400,000


EEI’s May 15, 2006, report includes information it gathered in follow-up discussions with
member companies. In contrast to the survey data, that information was not independently
assessed, but it is summarized here.

EEI members noted two main reasons for the length of renewal negotiations: frequent turnover in
tribal governance and long lead times in BIA action on land appraisals. EEI observed that
lengthy negotiations increase administrative costs to companies and tribes and can place
companies in the position of operating beyond a ROW expiration date. Shorter terms of years for
ROW renewals can also contribute to increased ROW administrative costs for tribes and
companies.

In its report, EEI noted that if energy ROW costs increase by a factor of 227 (the median
escalation over previous ROWs), total electricity costs will rise by 4% because of those
increases.

5.5.2. Interstate Natural Gas Association of America
INGAA is a national, nonprofit trade association that represents the interstate natural gas pipeline
industry. According to INGAA, its members account for virtually all of the natural gas
transported and sold in interstate commerce.

INGAA reports that several members chose not to become involved in the survey, either out of
concern that their participation could have an impact on present or future negotiations with tribes
or because there was not sufficient time to gather the requested information. INGAA also states
that members were reluctant to participate in the survey because the information sought was
highly sensitive business information, was subject to a confidentiality agreement, or could be
used by tribes as a starting point for negotiations.

Six INGAA companies and one non-INGAA member, a products pipeline company, submitted
survey information on a total of 20 energy ROWs on tribal land involving 15 different tribes in
11 states.

At INGAA’s request, an independent assessment of its use of survey data was conducted. Survey
responses were compared to information in the source documents submitted by participating



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companies. Because of concerns regarding the confidentiality of data, not all the companies that
submitted survey information supplied source documents for the independent assessment.

The independent assessment of the relevant documents confirmed the following findings that
INGAA included in its report:

   •    All respondents that provided data indicated that they were paying compensation in
        excess of fair market value.
   •    In addition to the per-rod ROW payment, many companies contributed to tribes in
        various forms (scholarships, recreational funds, etc.).
   •    The average term of years for initial and renewed ROWs was 20 years.
   •    Two respondents reported ROW negotiations taking at least two years; some others
        reported significantly longer periods; and one reported negotiations taking more than
        10 years.

Information was not available from the source documents to fully confirm INGAA’s findings
that tribes generally began negotiations by requesting terms of less than 20 years and that few
respondents were satisfied with the negotiations.

INGAA also included the results of a 1998 survey in its submission for the Section 1813 study.
That survey is not described here because it did not differentiate between tribal and allotted
lands, it included data from Canada, and from ROWs other than those for oil and natural gas
pipelines and electric transmission lines — the subjects of this report. Similarly, the case studies
included in the INGAA report that were volunteered by a non-INGAA member are not
summarized here because the company is a products pipeline company.

Three of the five case studies volunteered by EPNG for the INGAA report are summarized
below. The information in these case studies has been verified through source documents
provided by El Paso. The two remaining El Paso case studies were summarized previously in
Sections 5.4.2 and 5.4.4.

In 1993, the easement for the Plains to Gallup Crossover Line — two 30-inch, 56-mile natural
gas pipelines that cross the Laguna Indian Reservation and move gas from the Permian Basin to
the San Juan Basin — was appraised at a value of $300 per acre. The negotiated settlement for a
20-year ROW renewal was approximately $7,000 per acre.

Similarly, EPNG’s negotiated settlement for a 20-year ROW renewal for 23 miles of the
Crossover Line that crosses the Acoma Indian Reservation reached almost $7,000 per acre.
EPNG reported the land was appraised at $300 per acre.

Since it began its business relationship with the Gila River Indian Community (GRIC) of
Arizona in the 1930s with a 10-inch pipeline that covered 20 miles of GRIC land, EPNG
acquired additional easements and now has more than 100 miles of pipeline on the land. In 1987,
EPNG and GRIC negotiated an easement that would renew the ROWs for all EPNG facilities on
the tribal land with a common expiration date of December 31, 1994. An approved GRIC



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appraiser initially appraised the easement at $130,000 but modified it to $260,000. The final
negotiated agreement was $3.2 million.

When the ROW was renewed in 1994, EPNG paid $3.588 million for a 10-year renewal. In
2004, the company paid $5.2 million for an additional 10-year renewal in addition to payments
for administrative costs, a scholarship fund, and an education fund.

5.6.    Other Case Studies
The following examples of historic rates of compensation for energy ROWs on tribal land were
selected from among several submissions by tribes and the federal power marketing
administrations. The following case studies were chosen for inclusion because they were fairly
complete or they addressed issues raised in the Section 1813 study, including valuation methods
and conflict adjudication processes. Because of the limited time and resources, only the case
volunteered by Bonneville Power Administration was independently assessed.

5.6.1. Bonneville Power Administration
In 1978, DOE’s Bonneville Power Administration (BPA) entered into an agreement with the
Confederated Tribes of the Warm Springs Reservation of Oregon that provides BPA with
perpetual easements for an additional-width energy ROW as well as opportunities for two future
ROWs totaling a width of not more than 747.5 feet. Documentation indicates that BPA paid at
least five times market value for the additional-width ROW.

One of the future ROWs would accommodate moving BPA’s existing transmission line
approximately 12 miles if the tribe exercised that option. Compensation for the future corridors
would be negotiated consistent with prevailing economic conditions and market values.

Pursuant to the terms of the 1978 agreement, if BPA and the tribe were unable to agree on the
proper compensation for the ROW, it would be determined by arbitration. Each party would
select an arbitrator, and then these two arbitrators would select a third one. If the two arbitrators
were unable to agree on a third, either party could request the Chief Judge of the United States
District Court for the District of Oregon to appoint the third impartial arbitrator. Thereafter, the
three arbitrators would meet in formal session to hear and receive evidence from the parties
concerning the compensation for the ROW. The decision of the arbitrators as to the amount of
compensation would be binding on both parties.

5.6.2. The Hopi Tribe
The Hopi Reservation has the second lowest percentage of households with access to electricity
in the United States: 29% of reservation residents live without electricity, as opposed to the
national average of approximately 1%.130

The major provider of electrical services in Arizona has a 500-kV transmission line ROW across
the Hopi Reservation. Under the original 25-year term of the agreement, the Tribe was paid a
total of $755.00 for an approximately 50-mile ROW. In their submittal, the Hopi state that

130
  U.S. Department of Energy, 2000, Energy Consumption and Renewable Energy Development Potential on Indian
Lands, available at http://www.eia.doe.gov/cneaf/solar.renewables/ilands/toc.html.


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“Though there is some debate between the Tribe and the electrical provider whether the original
agreement was automatically renewable at the same compensation at the end of the first 25 years,
the electricity has continued to flow uninterrupted.” 131

The transmission line does not provide any electricity to Hopi Reservation residents. However,
the Tribe, to encourage electrification, foregoes compensation from the electric provider for
ROWs providing electrical service to the reservation. Often the Tribe pays to have these
distribution lines extended pursuant to the energy provider’s policy that extensions can be
charged to users on a per-foot basis.

Thus, the Tribe has been paid a total of $1,510 for a 50-year, 50-mile transmission ROW that
supplies electric power to millions while supplying none to the Hopi, foregoes fees on other
ROWs to supply power to its residents’ homes, and sometimes pays for the necessary extension
for those distribution lines. 132

5.6.3. Pueblo of Santa Ana
In the 1980s, the Pueblo of Santa Ana negotiated 20-year ROWs for a 12-inch natural gas
pipeline and a 30-inch gas pipeline at an acre-per-year compensation of approximately $356.42
and $143.65, respectively. Both ROWs included terms for an automatic renewal for an additional
20-year term, with compensation based on the rate of inflation. When the renewals occurred, the
ROW compensation came to approximately $697.56 and $271.66, respectively.133

5.6.4. San Xavier District of the Tohono O’Odham Nation
In 1992, the Bureau of Reclamation acquired an easement in the City of Tucson for a high-
voltage power line to connect to the Central Arizona Project pumping station. The easement
crosses the San Xavier District for a distance of about 1 mile. Land to the east of the District and
land to its west were acquired from the City of Tucson and Pima County for $7.50 per square
foot.

The District and its allottees were offered $1.76 per square foot for the land between those
easements, and the width of the easement was reduced from 60 to 30 feet. The power line has
been constructed, but negotiations for appropriate compensation continue.134




131
    Comments of the Hopi Tribe 3 (May 14, 2006).
132
    Id.
133
    Comments of the Pueblo of Santa Ana 3 (May 15, 2006).
134
    Comments of the San Xavier District of the Tohono O’odham Nation 1 (May 15, 2006).


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                                        Appendix
The document, Historic Rates of Compensation for Rights-of-Way Crossing Indian Lands, 1948-
2006, is an appendix to this draft report. The document is available on the public website,
http://1813.anl.gov.




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